Despite the Federal Reserve’s drastic rate hikes in recent times, the U.S. economy has shown remarkable resilience by avoiding the expected recession or crisis that typically follows such actions.
Impact of Rate Hikes
While the rate hikes did have some effect on certain sectors like new-home sales and manufacturing production, the overall economy seems to be less interest-rate sensitive compared to previous years. New-home sales plummeted, and manufacturing production stagnated, albeit showing signs of improvement recently.
Changing Dynamics
The economy, particularly the stock market, has shifted towards asset-light sectors such as technology and health companies. The focus on cash flow over sales growth among tech companies in response to higher interest rates has made them more efficient, despite potential investor concerns about slowing growth.
Market Trends
The tightening spread between B and BB rated junk bonds indicates a possible resurgence in the market, with the S&P 500 reaching record highs and experiencing significant growth in recent months.
In conclusion, the current economic landscape is defying expectations by withstanding rate hikes and exhibiting strong performance across various sectors.