The Fed has raised benchmark interest rates 10 times since March 2022 in an effort to combat high inflation
As the discount rate is starting to pick up because investors feel like the Federal Reserve is not done after all, we could make a major correction
So we’re a little bit cautious there in terms of the next few weeks and months however in light of the latest round of economic data economists are starting to build up the possibility of more rate hikes from the Federal Reserve.
The US economy and labor market remain resilient while core inflation is proving stickier than expected and despite the risks associated with a sharp rise in interest rates over the past 15 months.
Technology stocks in particular have led the charges so far this year as investors rushed to take exposure to the artificial intelligence boom that would further raise borrowing costs.
It would also raise discount rates, a measure Wall Street uses to value stocks by knowing the value of future earnings. This will not bode well for technology stocks, which are much of the recent driving force behind US stock markets, as higher discount rates usually lead to lower future cash flow.
