Both interest rates and the stock market have risen handily in 2023, despite the former being a headwind to the latter. The question is how long it will be before one or the other blinks.
That’s why higher interest rates are both a blessing and a curse, as Ned Davis Research Chief U.S. Strategist Ed Clissold writes on Wednesday, “The mantra for asset allocators has shifted from TINA to TARA .” That’s even more extraordinary given the backdrop of higher interest rates, he notes, which devalue future earnings in the face of high yields today. Given that tech companies in general tend to have cash flows far out into the future, their present value should be reduced by current rates.
That may be the case, but no one has told tech stocks, as the Nasdaq Composite is still up this month. In other words, high multiples haven’t put off investors yet. So how to know when the party is truly close to ending?Newsletter Sign-up Assigning cash a valuation of one allows investors to subtract it from a company’s market capitalization, leaving a valuation for the rest of the company.
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These are the stocks to buy if interest rates stay higher for longerThe Federal Reserve has raised rates by 5.25 percentage points since March 2022, and another increase is possible.
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