Valuation in a Rising vs. Falling Interest Rate Environment

You, know, that, a, DCF's, discount, rate, reflects, the, risk-free, interest, rate., Raising, this, rate, reduces, the, present, value, of, future, cash, flows., But, this, effect, isn't, the, same, for, every, stock., It, heavily, depends, on, when, a, company’s, cash, flows, actually, arrive., A, "growth, stock", has, small, or, negative, current, profits,, with, most, of, its, expected, value, far, in, the, future., It, acts, like, a, long-duration, bond:, its, present, value, is, very, sensitive, to, the, discount, rate, because, many, years, of, compounding, discount, apply, to, reach, today's, value., In, contrast,, a, "value, stock", is, a, mature,, profitable, company, that, generates, most, of, its, cash, flow, now., It, behaves, more, like, a, short-duration, bond:, less, sensitive,, since, there's, less, time, for, the, discount, rate, to, compound, against.

2022, showed, this, mechanic, clearly., The, Federal, Reserve, raised, its, benchmark, rate, aggressively, that, year., It, went, from, near, zero, in, March, to, over, 4%, by, December,, fighting, inflation, that, had, hit, about, 9%., That, was, the, highest, in, around, four, decades., This, fast-rising, discount, rate, affected, growth-heavy, indices, much, more, than, value-oriented, ones., The, Nasdaq, Composite,, with, its, heavy, weighting, toward, growth, and, technology, stocks,, fell, about, a, third, that, year., This, decline, was, much, steeper, than, what, more, value-tilted, benchmarks, saw, during, the, same, period.