During my March meeting, I realized that the bear market was in the midst of a rally that pulled it out of its territory for the year. I speculated that the index had dropped three weeks ago but that it has not yet re-tested the bottom of 2022, according to the Federal Reserve's March report. What affects the rapidly rising interest rate environment in high-growth markets this year?
Rates and IT Stocks are rising.
Due to their high price-to-earnings ratios and low dividend payments, rising interest rates may slow down businesses' cash flows and cause problems in the short run. However, there is no real evidence to justify that decision given equities' performance during previous rate rises.
According to Dow Jones Market Data, the Nasdaq median gain increased by 26.9% during rate rises from June 2004 to September 2007, but the Nasdaq climbed 26.9% during rate hikes. The most recent rate rise cycle was between December 2015 and December 2018, and although the S&P 500 fell 3.9 percent the month after the first rate hike, the average monthly decrease was just 0.9 percent. The data is somewhat unambiguous when it comes to stock market performance during and following rate rises, but Q1
Following rate rises, equity market performance is boosted by graphs.
Tech Earnings in 2022 Prospects
In my last note, although the stock market was in the midst of a shift, the market's movements were more intense, and fundamentals still looked strong in large tech. The S&P 500 is trading at its lowest rate since the epidemic, with a current P/E ratio of about 25.6. Earnings and revenues are expected to increase year-over-year for Q1 2022, with almost all states having no additional COVID restrictions in place. Companies should be reporting growth in Q1 as we go
Inflation and supply chain constraints will remain a theme in the coming quarters, and forecasts may be somewhat diminished in the wake of those concerns. However, fundamentals in big technology will look to support their respective stock prices in the coming weeks. The earnings statements will be instructing non only for the Q1 revenue numbers but perhaps more important how they forecast the coming year and beyond.