What happened
Shares of the e-commerce platform company Shopify (SHOP 3.24%) were sliding today, on seemingly no company-specific news. Instead, investors were likely continuing to fear that high inflation and interest rate hikes by the Federal Reserve could slow down the economy.
These aren't exactly new worries for investors, but recent comments made by former Federal Reserve chairman Ben Bernanke may have caused additional worry. The tech stock was down by 9.4% at 11:11 a.m. ET.
So what
Investors have grown increasingly concerned that the Fed won't be able to pull off a so-called soft landing for the economy as it raises the federal funds rate to tamp down inflation, which is running at a nearly 40-year high.
Image source: Getty Images.
Then today, former Federal Reserve chairman Ben Bernanke said that the Fed waited too long to raise rates. In an interview with CNBC, he questioned why the Fed delayed its response to rising inflation and said, "I think in retrospect, yes, it was a mistake."
The Fed has already hiked rates this year, the latest hike being 50 basis points at the beginning of May. Current Fed chairman Jerome Powell has indicated that more rate increases at the same rate are on the table.
High-growth technology stocks like Shopify have suffered recently because investors are concerned that as interest rates rise, borrowing becomes more expensive for companies. Additionally, higher inflation and rising bond yield rates also make potential future company earnings worth less than they would have been in the recent past.
Now what
Shopify's drop today adds to months-long pain for investors. The e-commerce company has fallen 66% over the past 12 months, and shareholders are no doubt wondering where the bottom is.
But long-term investors should also keep in mind that this company is still in the early stages of a massive e-commerce play. While there are no guarantees that the stock will rebound, with its shares now trading much lower over the past year, some investors may want to consider the company's long-term potential.
