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.

Last Speech Before Blackout: What Will Warsh Say?
Fed Chair Warsh speaks in Bangkok on October 16 Beijing time, the last official comment before the FOMC blackout ahead of the October 27–28 meeting. Markets price about 80% odds of no move in October and similar odds of a December hike: QQQ closed Thursday -1.34% at $747.58, SPY -0.42% at $773.93. On October 7 the 10-year hit 5.366% and the 30-year 5.728%, both highest since 2002. Bulls say the hold is priced and a non-hawkish speech lifts an overhang; bears say term premium and fiscal imbalances drive the long end, and the Fed can't fix either. What do you want to hear from Warsh?
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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
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