What we’re reading (10/24)
“Bull Market Okay Until Interest Rate Push Comes To Shove” (Briefing.com). “When the stock market's worst-performing sector is up 6.2% for the year in mid-October, it almost goes without saying that the stock market has had a good year…The stock market has shown that it can tolerate rising interest rates at these nominally low levels. What it has some difficulty with is a rapid rate of change in interest rates. When rates rise gradually, it is billed as an expression of confidence in the economic outlook. When rates rise quickly, it is viewed as a nervous expression of inflation pressures and the specter of the Fed being forced to raise rates to keep inflation in check.”
“Big Tech Stocks Are The Market’s Superstars But Rising Rates Could Bring Them Down” (MarketWatch). A nice summary of some recent research on the differential impact of rate changes across not just different sectors, but across companies of different sizes. Much of the media commentary about the impact of rates (including the article title here) posits that tech companies are particularly sensitive because they are long-duration stocks (i.e., the contribution of extra long-term cash flows to their current prices is comparably high). The research here apparently shows it isn’t just tech, but rather the top 5% in almost any industry is more sensitivity to rates.
“Congressional Democrats Take Aim At Private Equity” (Axios). “Congressional Democrats are again taking aim at private equity, but they don't have much more firepower than the last time around…the big differences between 2019 and 2021 is that Democrats control both the Senate and the White House, and that they aren't distracted by presidential primaries. But there's no reason to think the Stop Wall Street Looting Act will meet a different fate, particularly as Democrats continue to squabble over their signature legislation.”
“Maybe The Metaverse Can Save Facebook. Maybe.” (Insider). “Next week, the company is expected to announce a huge rebrand, which will focus on its expansion into the so-called metaverse. It's a "genius" and "classic" move in the world of branding strategy that could help Facebook, experts told Insider, but ultimately it may not be enough to save the company's reputation.”
“Trump’s Tech SPAC Could Make Him Billions With Meme-Stock Frenzy” (Bloomberg). “News late Wednesday that the former president’s nascent media enterprise, Trump Media & Technology Group, is planning to go public via a special purpose acquisition company has sent retail investors into a frenzy, even with few details released. The stock gain drove the implied value of the new venture to more than $8.2 billion.”
