The current consensus in the markets is that rates are “higher for longer”, which is a change from just a few months ago when the market was sure rates will start declining in Q4 of 2023. Bond yields are now up to historical levels not seen in over a decade.

The questions we need to ask ourselves are: will the fed continue raising rates or will it pause? Are we finally at peak rates and have multiples adjusted to these higher rates?

As far as I can see we pretty much have two scenarios for 2024/2025:

  • Rates stay “higher for longer”.
  • Something breaks and rates start coming down.

So what’s the investment plan?

  • If rates stay at these level and assuming multiples have already adjusted to higher rates, than stock prices of individual companies should track earnings per share growth.
  • If rates start coming down than we may even see some extra upside from multiples going up.

I do believe that the fed is finished raising rates for this cycle and so my investment plan is to be long cash flow generating tech companies and add some duration on top.