we learned from the Producer Price Index that inflation for companies is growing at 9.6%. This means that inflation could eat up Microsoft’s growth, giving it an inflation-adjusted growth rate of 5.4%. Rising inflation and interest rates are forcing analysts and investors to reconsider their valuations and projections. On Tuesday, CNBC reported that analysts expect that the Fed will increase its tapering plans from $15 billion per month to $30 billion per month.
Investment returns commonly reflect the degree of risk that investors expect. A higher rate of return usually has a higher amount of risk. However, if the rate of return is too small, it creates a different risk—that investors won’t find the investment worth their time. If bond investors can’t get the return they want, they may choose to invest elsewhere, even if the investments are a bit riskier, such as foreign bonds, dividend-paying stocks, utilities, and real estate.Many investors commonly move money around, looking for the highest available yields. However, there must be a certain level of risk to justify the return.