Inflation is out of control. Gas prices are through the roof. And now, investors on Wall Street are scared about what the Fed might do next. Add it all up, and you get some ugly results on Wall Street, with the Dow sinking 825 points Monday and Nasdaq down 4.3%, which has now put stocks in a bear market.
The S&P 500 is 20% lower than it was in January, which was the all-time high just six months ago.
The Fed raised interest rates by a half-point in May, the first time it has done that in 22 years. The horrific inflation report that came out last week means Wall Street will be pushing extra hard for the Fed to take action to keep prices under control.
A CNN report chronicles two outcomes for investors that are both negative. If interest rates go higher, businesses will face much higher costs for borrowing capital, which can take a massive chunk out of a bottom line.
If the Fed overcompensates, then the ramifications could send the economy into a recession.
Jonathan Krinsky is a technical analyst quoted in a CNBC story Monday about what could happen next with the markets.
“The odds of a ‘June Swoon’ straight to 3,400 have gone up significantly, in our view. We thought a momentum reversion where winners got bought and losers sold would create chop at the index level, but last week is a reminder that the risk continues to be to the downside.”
Gas prices rose to a national average of over $5 this weekend, pounding home the fact that Americans are dealing with the worst inflation in more than four decades.