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Interest rates sending the stocks down

For the entire year of 2019, the interest rates were dropping like a rock and for the entire 2020, the rates were trading flat. That was a reason behind a great rally in 2020 when the high-flying, hi P/E tech stocks like EV stocks, innovation stocks, genomic stocks, 3D printing stocks, SPACS, and all stocks that were flying high despite making now product, having no sales, no revenue whatsoever. Only promises of future changes and disruption.

But then, early in January – February 2021 the rates started rising again sending the tech stocks and high P/E stocks to the abyss. From June to September 2021 the rates dropped and traded flat. That calmed the tech stocks market.

 
Treasuries
 

But, last few days we are seeing the interest rates spiking up again and it has had a negative impact on the stocks. Higher rates impact multiples and slash them down.

Here is a chart showing 10-years Treasuries compared to ARKK ETF and there you can see the correlation of interest rates and the fund that invests primarily into the high-flying, disruptive, but unprofitable stocks. The chart illustrates the point of interest rates impacting the PE and sending stocks down.

 
Treasuries
 

As long as the rates keep rising, expect pressure on the stock market and a downward move.





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