[short_sells_poo]

Another way you can think about this: imagine you have a portfolio that makes 10% every year and risk free rate is zero. If you reinvest your returns (ie compound returns), in 10 years time you'll have made 160% of your original investment vs. 0% if you kept your money in a risk free portfolio.

But now let's say that risk free rates are 5%, which means that your portfolio has to compete with a net positive value asset that is essentially free of risk and in the same 10 year horizon will make you 60%, so your excess profits are now "only" 100%, which is a significant reduction from the original value proposition.

Thus, for the same risk profile, investment firms have to become much more restrictive in what they put in their portfolio. An entire class of investments (e.g. companies who are not expected to ever make money but have hype) has become basically a negative value proposition.

[MuffinFlavored]

The Fed's dot plot shows they plan on lowering interest rates within the next 24 months.

How can Microsoft (big tech company) not have faith that their highly paid engineers + managers can't build amazing products efficiently (aka not costing too much) to the point where they can outcompete the risk free rate which is temporarily ~5% and headed back down to 2-3% within the next 2-3 years most likely?

[disgruntledphd2]

Sure, but 24 months is six quarters of potentially lower returns and share price. Execs are bonused on share price appreciation so the layoffs make sense to them.