Plain English with Derek Thompson Economic Mystery Hour: How Low Will Stocks Go? Is a Recession Inevitable?
May 3, 2022
Morgan Housel, a partner at Collaborative Fund and author of 'The Psychology of Money', dives deep into the troubled waters of tech stocks and the looming recession. He unpacks the factors driving recent market volatility and how investor sentiment is shifting from high-risk tech investments to more stable options. The discussion also touches on the complexities of consumer sentiment amid economic growth and inflation, along with the hot topic of student debt cancellation, scrutinizing its future implications and political motivations.
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Stock Market Decline Perception
- The 2022 stock market decline feels worse because of recent market behavior and an influx of new investors.
- Many new investors only experienced a rapidly rising market, making the correction feel extreme.
Tech Stock Decline and Rivian Example
- Tech stocks, especially high-growth ones, experienced significant declines in 2022.
- Companies like Rivian, with high valuations but no sales, illustrate the narrative-driven market.
Interest Rates and Stock Valuation
- Low interest rates prioritize future narratives over current earnings in company valuations.
- Rising interest rates shift the focus to actual profits, impacting tech stocks significantly.
