Fed rate increase = lower hifi prices?

Hedge funds have been buying up as much housing as they can since 2008, greatly restricting supply. They pay cash, then sit on it, sometimes rent it, and when prices soar, they sell. A lot of this pain was avoidable but hey, freedumb.

All the best,
Nonoise

Okay, I’m no electrical engineer and have no expertise in equipment design, but I have spent my career in finance as a market strategist and money manager so take this for what it’s worth. In normal times you’d think raising rates leading to a slower economy, decreased demand, and possibly a recession then yes, eventually audio prices might come down somewhat.

But, these are not normal times. Inflation is not being caused by demand but by a lack of supply due to covid shutdowns, China limiting its shipments, etc. Raising rates will do nothing to fix this because demand is not causing the problem. In a few months inflation numbers will have easier comparisons versus last year, which by itself will bring inflation numbers down, and as covid (hopefully) continues to wain and supply channels and factories get back up to speed that will alleviate the supply problem, so between these two factors we could see inflation come WAY down over the next six months or so. That’s my take anyway.

So, bottom line and to answer your question directly, despite rates rising they are still extremely low by historical standards and the underlying economy is strong with historically low unemployment, so a 50bp hike here or their and the 10-year at 3.1% it’s unlikely the economy — and hence demand — will be affected to any significant degree and thus there’s no incentive or need for audio companies to lower their prices. And my bet is once inflation numbers come down for the reasons mentioned above the Fed will feel less pressure to raise further and long yields will moderate and possibly even come back down.  Good question though.

You forgot price gouging because they can hide it in the inflation :-)   No I am not making that up, it was a researched report.

Inflation is much higher in the western economies that printed money during Covid as opposed to Asian economies who did far less of this. Can you comment on that? I would be interested in your thoughts.

Rates were low pre-covid because inflation was running less than 2%, and as one of the Fed’s two mandates is price stability, which generally means an inflation target of 2% they were justified, given their mandate, to keeping rates low and adding to their balance sheet.  Remember, they were also guarding against the very real risk of disinflation, which is a very unhealthy situation as well.  And much of Europe was fighting negative interest rates so obviously they needed to throw the kitchen sink at the problem even more than we did. Can’t speak to Japan and China, but Japan’s economy and stock market have gone nowhere in 30 years and China, well, who the hell knows what goes on there.  Would you wanna live in either place?  It’s possible they aren’t experiencing shortages of the things they manufacture and normally export around the world and with exports being curtailed we’ve got shortages and thus higher prices in those products.  I’ll just say this, if we were “printing money” unnecessarily pre-covid our inflation rate would’ve been a helluva lot higher than 1.5%.

I don’t know what report you’re referring to and there are certainly companies that have been raising prices despite not experiencing rising input costs (3M, Hostess, etc.) but I’d argue audio companies are not one of those as their input costs (semiconductors, etc.) have certainly increased significantly and are justified if they feel they need to raise prices to cover their significantly increased manufacturing costs.  

@soix well said