filthy casual
09-18

Think of Fed rate hikes as slamming the brakes on a speeding train—the deceleration causes turbulence, not a smooth ride. Rate hikes intentionally tighten money, creating direct headwinds for equities:

* The "Lag Effect" Trap: Rate hikes take 12 to 18 months to hit corporate balance sheets. Stocks sink early because markets price in the recession and earnings slump expected down the road, long before it shows up in quarterly reports.

* The Death of TINA ("There Is No Alternative"): When risk-free Treasuries and money market funds offer solid 5%+ yields, stocks lose their monopoly on investor capital. Safe cash becomes a direct competitor to volatile equities.

* Discount Rate Math: Stock valuation models discount future earnings against interest rates. As rates rise, the present value of those future profits shrinks instantly, hitting tech and growth stocks hardest.

* "Good News Is Bad News": Strong economic metrics now spook investors because strong data gives the Fed permission to keep squeezing the economy.

Real market relief doesn't arrive while the Fed is tightening—it shows up only when the Fed stops hiking and signals an actual pivot to rate cuts.

PPI Surges 1.3% MoM — Can the U.S. Equity Rotation Hold?
QQQ slipped 0.13% while SPY gained 0.28% as hotter producer inflation pushed capital from AI-heavy tech into financials and consumer stocks. September PPI rose 1.3% month over month, more than double expectations, while energy lifted annual wholesale inflation to 6.3%. Bulls welcome broader market leadership; bears fear margin pressure and delayed rate cuts. Should investors favor SPY value sectors, hold QQQ, or wait for inflation expectations to reset?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

  • popzi
    09-18
    popzi
    The terminal value gets smoked first in high-rate regimes. That is why long-duration names get hit before the earnings damage even prints
Leave a comment
1