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Last year the U.S. government was still in the process of trying to push through the multi-trillion dollar Build Back Better stimulus plan at the same time that Jerome Powell claimed that rising inflationary pressures were ‘transitory’ and the central bank was ‘not even thinking about’ raising interest rates and would most likely let the economy run at higher levels in order to assure a recovery and raise inflation to its 2% target range. What a difference a year can make as today we have core inflation in North America running at a four decade high rate of over 6% and central banks are scrambling to show investors how tough they can be on fighting inflation by signalling interest rate hikes of over 250 basis points this year at the same time as they move from a ‘quantitative easing’ mode to a tightening where they start selling bonds to unwind the massive stimulus needed to get through the lows of the pandemic. Throw on top of that a stock market that had seen valuations pushed to levels not seen since the ‘dot com’ bubble over twenty years ago and speculation in almost every other asset class (bonds, crypto currencies, EFTs, SPACs) and we should not be surprised that stocks dropped 20% from those peak levels and the high growth Nasdaq Index over 30% before recovering slight in the past week. The initial round of selling had been focused on most of the ‘pandemic winners’ in the high growth sectors (i.e. the social media stocks, streamers, innovation sectors) which resulted in over 50% of Nasdaq stocks falling more than 50% from their peaks. So far this year, the tech-heavy S&P500 has lost just under one-fifth of its value. Among the worst-hit high profile names have been Amazon.com (-36%), Tesla (-38%), Meta (-45%), Zoom (-44%), and Shopify (-76%). As a whole, venture-backed companies that have gone public during the pandemic are down 48%, according to PitchBook. The boom times of the last decade are unambiguously over. (more…)