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Over the past decade, mega-cap tech stocks delivered game-changing returns for investors, thanks to a lower interest rate environment that allowed companies to fuel their expansion at a cheaper cost. But in 2022, several Big Tech stocks tumbled to trade near multi-year lows as central banks hiked interest rates to fight inflation.
Generally, when interest rates rise, the higher cost of debt creates a tighter lending environment due to higher interest payments. Moreover, it reduces the spending capacity for individuals and households, which will then impact the top line of companies. As inflation touched 40-year highs in 2022, enterprises also had to wrestle with lower profit margins.
