What’s going on with Shopify stock
Shopify stock was tumbling yesterday, despite no specific news from the company. Instead, investors were most likely concerned that the Federal Reserve’s high inflation and interest rate hikes would stifle economic growth.
Investors’ concerns about the economy aren’t exactly new. However, recent statements by former Federal Reserve Chairman Ben Bernanke may have added to their worries. As a result, shares of the e-commerce platform company Shopify (NYSE:SHOP) were down by 10.57% at market close on Monday.
Why we care
The Federal Reserve’s raising the federal funds rate to combat inflation has investors worried. They are concerned that it won’t be able to execute a so-called soft landing for the economy as it raises the rate to cool down prices, which are at a nearly 40-year high.
According to Ben Bernanke, the organization’s former leader, the Federal Reserve waited too long to raise rates. He questioned why the Fed delayed its response to rising prices in an interview with CNBC, and he added that “in retrospect, yes, it was a mistake.”
The Federal Reserve has already increased rates this year, with the most recent increase of 50 basis points occurring at the start of May. Current Fed chair Jerome Powell has stated that more rate hikes at the same pace are possible.
High-growth technology companies like Shopify have taken a hit because investors are concerned that it will become more expensive for businesses to borrow money as interest rates rise. In addition, rising inflation and bond yield rates make anticipated future company profits less valuable than they previously were.
However, long-term investors should also remember that this firm is still in the early phases of a major e-commerce initiative. While there’s no assurance the stock will rebound, its shares are trading at a lower level over the past year. Therefore, some investors may want to consider its long-term potential.