The past four weeks have been very much about investors’ concern over the outlook for inflation (cost of living) and how much interest rates will rise in the near term. We saw Australia’s central bank (RBA) raise its interest rate last week to 0.35% and Federal Reserve in the US do the same but a little harder than the RBA. It needs to be said here that while rising interest rates reduce the outlook for economic growth in the near term, moderately higher interest rates are not expected to impact long term economic growth as businesses and consumers eventually adjust to different levels of inflation and interest rates through gradual price increases and nominal wages growth.
Over the long term its innovation and productivity that drive growth in stock prices.
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