Musings on Markets: Risk Capital and Markets—A Temporary Retreat or Long Term Pull Back?

The article analyzes the 2022 market downturn through the lens of risk capital availability, arguing that inflation-driven pullback in risk capital explains declining equity prices, widening risk premiums, and underperformance of high-growth, unprofitable companies. The author contends this pullback is likely structural rather than temporary, and reflects a necessary correction after a decade of easy capital allocation that has distorted markets.