The Federal Reserve announces a fourth straight 75 basis point increase in interest rates. The markets are taking this as an even more bearish signal for the future in asset prices and is showing that more danger and pain is ahead for investors.
With ongoing rate rises in recent months, Fed Chair Jerome Powell has emphasized his commitment to bringing down inflation. However, he said in August that rising borrowing costs meant cause harm to consumers and companies. Margin calls could be right around the corner for hedge funds and retail investors.
Source: The New York Times
HEDGE FUND OUTFLOWS
Outflows from hedge funds are another issue that is raising worries all around. According to statistics given by HFR, investors made an estimated $26 billion in hedge fund investments during the third quarter, according to Reuters.
In addition, the second quarter had a $27.5 billion outflow, marking the first time since the peak of the COVID epidemic which was in 2020 that hedge funds have seen consistent withdrawals from one quarter to the next. Conditions are as bad or even worse in some areas of the markets since what we have seen during the 2020 lockdowns.
This high number of outflows are higher than average and could indicate a more sustained bear market could be ahead for investors. The cost of money going up means there is going to be serious pain ahead in the markets.