Zerodha co-founder Nikhil Kamath, who usually dispenses market advice on Twitter, on Wednesday had a bad news for the Gen Z entrepreneurs. He said the period of 2008 to 2022 was an anomaly while sharing a chart comparing US Fed rates and inflation from July 1954 to January 2023. He also said that Gen Z entrepreneurs won’t see a high growth rate in their businesses because of higher cost of capital.
“Take the narrative of 2008 to 2022 was an anomaly, not the norm; what worked for millennials will not work for Gen Z – higher cost of capital will directly impact the growth rate,” tweeted Kamath referring to the 15-year period when US Fed kept its interest rates low even as the inflation rate was higher. When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down.
Kamath further said millennials like him are the “luckiest generation” for having access to capital at a low rate even with high inflation, something that is rare.
“For every young person looking to start a business, don’t follow what the millennials did (luckiest generation in my mind, including myself) in that 15-year Era…,” he tweeted.
He also said how the chart shows when an economic recession is on the anvil.
For every young person looking to start a business, don’t follow what the millennials did (luckiest generation in my mind, including myself) in that 15-year Era…
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“It’s uncanny how #inflation and fed rates spike just before a recession over a 70-year period. A fall in inflation and the first downward change in rates could be confirmation of a #recession…,” tweeted Kamath.
Meanwhile, two Federal Reserve officials on Wednesday said more interest rate rises are in the cards as the U.S. central bank presses forward with its efforts to cool inflation, but declined to say whether unexpectedly hot jobs data would push them back to a more aggressive monetary policy stance.
Moving to a federal funds rate of between 5.00% and 5.25% “seems a very reasonable view of what we’ll need to do this year in order to get the supply and demand imbalances down,” New York Fed President John Williams said at a Wall Street Journal event.
Speaking on Tuesday, Fed Chair Jerome Powell said “if we continue to get, for example, strong labor market reports or higher, higher inflation reports, it may well be the case we have to do more” with rate rises over time.