Stock markets around the world are struggling with falling numbers as worldwide inflation rates and borrowing costs continue to rise.
The TSX (Toronto Stock Exchange) closed just under 20,700, down some 500 points. Of the struggling stocks in the market, Shopify, an Ottawa-based company, had the worst performance, down 14%. In the first financial quarter the company lost a shocking $1.5 billion (USD), versus a profit of $1.3 billion in 2021’s Q1. At one point, the company was the most valuable Canadian company. However, it’s now only worth 25% of what it was at its peak due to slowing interests post-pandemic.
Daniel Chan, a TD Bank analyst, stated: “Easing lockdowns are driving higher consumer spending on in-store retail, services and travelling. These shifting spending patterns are a headwind for Shopify.”
Things were no better in the United States, with the Dow Jones falling by over 1000 points, over 3% of its value, and BASDAQ falling by 5% of its value, or 600 points. As a result the NYSE has been seeing major problems.
A lot of these problems come from hard-hit tech stocks.
“Large-cap technology, media and telecom stocks are deflating from their pandemic-bubble peak, but the group still has more air to lose amid rising interest rates and cooling growth expectations,” said chief equity strategist at Bloomberg Intelligence Gina Martin Adams.
The U.S. central bank’s decision to raise its interest rate, its biggest move in history, has led to value drops of up to seven percent for major stocks like Apple, Google, and Tesla.
Chair of investment firm J Zechner Associates claims that the sell-off is taking place due to investor concerns over rising borrowing rates as a result of the rising inflation rate.
“The punch is being pulled away. Free money has sustained this bull market for the last 12 years effectively, and we’re probably seeing the most aggressive move away from free money that we’ve seen in over 20 years,” he stated during an interview last Friday.
“The only way to tame inflation is to is to try to slow down growth or tighten the economy a little,” Zechner said. “And one of the casualties is the stock market.”
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