For the co-founder and general partner of Craft Ventures, David Sacks, the United States is headed for a “very serious” recession, because the markets have been experiencing the “worst recession since the dot-com crash”, Fox Business announced.
“The reason the sentiment is so negative is that the market has collectively realized that the highs we saw last year were artificial,” Sacks told “Morning’s with Maria” earlier in the week. “They were the result of the Fed, Congress and the administration pumping $10 trillion of liquidity into the market.”
For the venture capitalist, that ended in inflation and now the Fed has to raise interest rates: “And so in the last six months, there really has been a collapse in valuation levels as people realize that we are not going to be in this low interest rate environment forever.”
Expert warns that the United States is headed for a very serious recession
Sacks commented that in the last six months, something like 14% of global wealth has evaporated: “If you go back to 2008 and the global financial crisis, it was at 18%, so you’re almost at a destruction level of wealth. wealth that we have not seen since 2008.”
Sacks’ report came a day after stocks sold off as more retailers reported a negative hit from inflation that translated into the worst day for stocks since 2020, when the Dow dropped more than 1,100. units, or 3.6% on Wednesday.
For Sacks, what is happening is that the consumer is being affected by the vertiginous increases in prices: “Wages are not up to inflation and, therefore, consumers do not feel as satisfied, and it is beginning to see that in the quarterly reports.”
With these data, the expert foresees a slowdown and a recession in the real economy.
Sacks argued that growth stocks, including new IPOs, SPACs and “small-cap growth stocks type of stocks” have fallen sharply since inflation became a big issue: “So there has been a big drop in these types of growth stocks, again down 80 to 90% and that has reverberated in the venture capital markets in Silicon Valley.”
Saks also anticipates a recession for venture investing, though he noted that investing will continue during a recession as innovation never stops.
But he warned that startups will have a tough time because the availability of capital will shrink and it will be hard for many to get ahead: “So I expect there will be some tough times for the startup ecosystem in the next couple of years.”
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