Remember "a permanently high plateau"?
Of course you don't; you weren't alive when it was spoken.
I've recently written on the yield curve. What most people commenting in that thread failed to recognize (and our various folks in the investing and money business, including Powell) is that these swings are a Kondratiev cycle and there is no nation in recorded history that has managed to evade them.
Tamper with them, try to get around them, make excuses for them, yes.
Actually change them? No.
As I pen this the market has been on an absolute tear since election day. The irony is that many of Trump's policy pronouncements, such as removing EV mandates from carmakers (whether explicitly or by setting fuel standards to a level impossible to attain under the laws of thermodynamics any other way, as the Biden path in fact did) means Tesla no longer has a government-driven sales quota.
Now that's not to say that people won't want to buy Tesla vehicles standing on their own in a field of vehicle choices. The obviously have but Tesla has benefited mightily in cash flow from those "credits" that others have had to buy (from Tesla) for the last several years which has been reflected in both the price of Tesla vehicles (downward) and Tesla's P&L statement (upward.). That cash flow, if the mandates are removed, will disappear and the cost of them in the price of fuel-powered vehicles will also disappear while at the same time the subsidy in favor Tesla car prices will also go away. In other words all other things being equal Tesla vehicles become more expensive and fuel-powered vehicles becomes less expensive because the forced payment from other companies to Tesla disappears.
How will all this balance out? I have no idea but it is flat-out nuts to believe that it will be accretive to Tesla's earnings and thus should be reasonably-reflected in a higher stock price. Yet that is exactly what has happened.
May I remind everyone that removing deficit spending by whatever means it occurs is good in the longer-term, particularly from an inflation standpoint (since all inflation is in fact caused by creation of credit) but a large part of the last several years' stock market price rise has been driven by that inflationary impulse.
Perhaps the market is telling us that despite all the bluster and claims nothing will be done about any of that and yet somehow we'll evade the march higher of interest rates over the next couple of decades, and evade the already-occurred turn in that cycle. I've heard a couple of podcasts asserting that in fact rates will continue to come down from here, implying that we're headed back to a 2% long term bond.
No we're not.
Yes, there will be periods in the next twenty or thirty years when rates will fall but the general trend for the next two to four decades, with the median expectation of three decades of time, is upward.
The firms that will fare best in that world are the ones who have no operating leverage (that is, debt) on their balance sheets because you can't be involuntarily exposed to higher financing costs if you have no debt. You don't have to deal with a ratchet job that isn't present and every firm is different in this regard in terms of its exposure. A key element any investor in a firm should be looking at right now is the amount of debt on the firm's books compared with its free, unlevered cash flow -- that is, can the firm pay it off if necessary from operating income rather than roll it over or are they stuck with whatever rate environment they are presented when that time comes? As an example Nvidia has an operating cash flow of about $49 billion with $10 billion out in debt. Push comes to shove they could pay that off and survive. It would hit their operating earnings severely but it could be done.
Now look at a firm such as Moderna. You'd think they're mostly ok because the only have $1.3 billion in debt. The problem is that their operating cash flow is negative so they can't pay it off if necessary. Whatever the market deals them in terms of a rollover rate they have no choice and must accept it.
How about Tesla? Their gross operating cash flow is $14.5 billion but they have nearly $13 billion in debt. While in theory they could pay all that off it would ruin their cash flow for that year. Nonetheless they'd probably survive such a crunch, although not easily.
How about Amazon? $112 billion in cash flow but $159 billion in outstanding debt.
Oh by the way this analysis has to extend to suppliers you can't replace easily too. In the 1990s this was a huge problem as Internet access evolved; the DSL folks were all wildly levered and existing on Wall Street "another shovel of cash please" money, unable to generate free cash flow.
They all blew up when that dried up and if you were dependent on them you blew up too as your customers got cut off.
The usual answer to this sort of analysis is that the firm has plenty of time to figure it out and/or increase their operating cash flows before the debt must be either rolled or paid. In a generally-declining rate environment this is almost-always true because tomorrow its cheaper to finance something that it is today, everyone knows this and therefore the odds of a dislocation and squeeze are small.
In a generally-rising environment the exact opposite is true: Everyone knows the price will be higher to roll over the debt tomorrow and thus the risk of a squeeze and bankruptcy rises vertically as the debt outstanding .vs. actual cash flow (not including leverage) goes up.
Read balance sheets and key financial statistics folks. One of the greatest risks in a concentrated market like today's is that an utterly enormous amount of the index price (and thus ETF prices) is concentrated in just a handful of firms, and its very easy to just buy the ETF based on its current price change without looking at all at the concentration of risk or what those firms' balance sheets look like.