Just like inflation can be caused by many things, e.g. supply chain disruption and money printing, deflation can also be caused by many things, including interest rates. In fact, isn't that what the Fed wants? To lower inflation / cause deflation via higher interest rates? So yes, I agree with you: a large part of the deflation is caused by interest rates, but that's still deflation nonetheless.
> So if you can buy more of a company on lower returns it isn't far different from less of a company on higher returns.
There is a big difference when you're in a highly deflationary environment. Inflation and deflation can cause price spirals. In periods of high inflation, people rush to spend money because it's losing value daily, which causes prices to go even higher. In periods of deflation, the opposite happens: people hold off on spending causing further price drops. VCs are holding cash and not investing much of it because of deflationary expectations. This is causing valuations to drop even lower.
Equities are coming back to reality while the underpinnings of businesses are being hit by inflation. The equity coming back down is a function of the inflation. VCs aren't investing because the returns on the companies look particularly poor in the current macro and in a macro that has interest rates as opposed to free money.
I think we're saying the same thing with different words. I'm saying that tech equity is deflationary. You're saying the price of tech equity is going down. Those are equivalent statements. The reasoning isn't that relevant. What is "macro economic outlook" other than an expectation about the future price?
> So if you can buy more of a company on lower returns it isn't far different from less of a company on higher returns.
There is a big difference when you're in a highly deflationary environment. Inflation and deflation can cause price spirals. In periods of high inflation, people rush to spend money because it's losing value daily, which causes prices to go even higher. In periods of deflation, the opposite happens: people hold off on spending causing further price drops. VCs are holding cash and not investing much of it because of deflationary expectations. This is causing valuations to drop even lower.