The tech sector has been struggling as the Federal Reserve continues to hike interest rates to lower inflation. How does the Fed impact tech companies? Higher interest rates take big bites out of future growth for companies. For companies that experience aggressive growth very quickly (like tech companies), higher rates have a bigger, more negative impact. So this week, expect volatility in markets, especially as tech companies highlight weakness due to the current economic environment. You might be wondering: Should I sell my tech stocks? And the answer is no. Investing for the long term means looking beyond quarterly earnings, and bad stretches in the market (which could last months or longer). But it does mean that if you are very heavily invested in tech, it might be time to consider approaching your portfolio with more balance. While sectors like utilities and consumer staples might not be as exciting, they could help mitigate some of the risk in your investment portfolio.
Sliding Home Sales
Over in the housing sector, sales of new residential homes dropped yet again as prospective buyers say “no thanks” to higher mortgage rates and house prices. New home sales dropped nearly 11% in September from the month prior and are 17.6% lower than last year. In a further sign that the real estate market is struggling, mortgage applications dropped 3% from the prior week, while the number of mortgage applications are 42% lower than last year according to the Mortgage Bankers Association. Mortgage rates continue to be the culprit, with the average rate on a 30-year fixed-rate loan sitting higher than 7%, the highest rate since 2001. While home prices and mortgage rates probably aren’t where you’d like them, this does mean that if you’re an interested buyer, the power is starting to shift back into your hands. This also makes the possibility of negotiation more likely.
