What happened

Shares of high-tech Fintech stocks have struggled this week, largely due to the release of the Federal Reserve’s December minutes.

Shares of Cathie Wood’s Ark Innovation ETF: (NYSEMKT: ARKK) At the close of trading on Thursday, it was down almost 10% during the week, while the company’s shares were bought now, paid later (BNPL) Confirm: (NASDAQ: AFRM) decreased by about 19%. Shares of an artificial intelligence lender Upstart Holdings: (NASDAQ: UPST) և Digital banking application SoFi Technologies: (NASDAQ: SOFI) decreased by more than 21% for the week և by almost 13%.

And what

There does not appear to be any specific news from the company regarding any of these shares or the funds being traded on the stock exchange. Rather, they are responding to macro news նոր the new direction of the Federal Reserve, as in recent months.

It’s hard to believe, but earlier this year many thought the Federal Reserve would not want to raise its overnight lending rate, the federal funds rate, until 2023, or maybe even 2024. While talking about inflation, he finally retired the word “transient”. At the end of 2021, the Fed announced that it would reduce its ծրագիրը bond-buying program, which began at the beginning of the epidemic. The Fed says it may raise interest rates in March, and the new surprise in December is that the Fed may actually start lowering its balance sheet after raising the first interest rate.

Image source: Getty Images.

When the Fed moves to reduce its balance sheet, as opposed to buying bonds, also known as quantitative easing, it will actually remove liquidity, reduce the country’s money supply, which can make the stock market a difficult place.

“The protocol showed it to the FOMC [Federal Open Market Committee] “The consensus is that the economy is ready for a massive monetary easing, and the micron version is unlikely to slow it down,” said Anna Wong, chief US economist at Bloomberg. “We think there is an exchange rate risk. The increase during the March meeting has increased significantly, and will closely monitor Fedspeak before the January meeting for further guidance.

Yields on longer-term bonds have risen since the release of the Fed in December. Yields on 10-year US Treasury bonds rose to 1.73%, slightly higher than the last 1.5% in 2021. , which makes it difficult to support high ratings. Shares like Upstart և Affirm reached huge ratings in 2021. Ark Innovation ETF is filled with high-tech stocks such as: Tesla, Rocu:, և: Zoom Video Communications:. SoFi had reached a rather high appreciation in 2021.

What now

Many of these tech-savvy stocks have great potential because they are disruptive in their prospects. But I thought stocks like Upstart և Affirm’s were going up too high 20 in 2021, so I think there’s going to be a reversal.

Ratings are better now, but there may still be difficult market conditions for 2022, as the Fed has yet to meet its first interest rate or start off its balance sheet. If SoFi can get its expected banking charter, it may help the company a bit, as banks are usually more protective of inflation.

I’m a little more concerned about Affirm right now because of BNPL regulatory oversight հնարավոր possible credit problems in a higher interest rate environment. I still like a lot of tech-savvy Fintech stocks in the long run, but I think it’s appropriate to make the ratings more realistic right now.

This article presents the opinion of a writer who may disagree with the position of the “official” recommendations of Motley Fool Premium Consulting. We are motley! Questioning an investment thesis, even our own, helps all of us think critically about investing, making decisions that help us become smarter, happier, and richer.