Stock market All signs indicate will be under pressure for next 6 months "Market participants with less than 12 years of experience have never been burned and have no idea how hot the stove can get" — Seth Klarman Clearly, 2022 can be expected to be a far more challenging year than 2021 in terms of generating returns. Returns have two components, earnings growth and P/E expansions. Earnings growth may not be a challenge, as the demand across sectors will continue to drive decent earnings growth. The challenge will be P/E expansion in a scenario where cost of capital will move up due to higher interest rates. Higher cost of capital should ideally compress P/E valuations. The Fed is already talking of 3-4 rate increases this calendar year, and foreign brokerages are all of the view that it could be even up to 7 rate hikes. In such a scenario, there is a likelihood of P/E compressions happening. So, instead of earnings growth and P/E expansions moving in th...
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