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Investors are feeling the consequences of inflation, which has led them to have less confidence in investing their money into stocks. The Dow Jones Industrial Average hasn’t seen this many losses since 1923, while S&P 500 announced that it too would reach seven straight weeks with no growth – the longest streak since 2001.
The stock market has been on an epic losing streak, with Dow Jones down 3% in the last week and S&P verse 20%. This is not a good sign for investors who are trying to save money by investing their funds into companies that will make profits off of them later.
The recent economic data has been very troubling for investors and Wall Street alike. In addition to high inflation rates, many people are also alarmed with how the Federal Reserve is handling things in order to control market prices.
S&P briefly entered bear-market territory, according to a recent report by the Bespoke Investment Group.
Analysts are suggesting that the Federal Reserve increase interest rates in order to lessen demand and maintain the stability of prices. Feds officials have announced their intention to cool down economic activity while preventing a recession from happening.
However, the plan was met with doubts as many believed that it would be impossible to execute the plan. Former New York Federal Reserve Bank president Bill Dudley also says so.
The Federal Reserve has confidently declared that they will try to be successful in their plan, and like the 1994 “soft landing,” which was implemented successfully. Others are not so optimistic about how things will go down – especially since there is no guarantee of the 1994 handbook playing well in the current context.
There were differences in the conditions between 1994 and 2022. Geopolitics is one. Back in 1994, the North American Free Trade Agreement (NAFTA) had just been adopted, and the Berlin Wall had just fallen. The events allowed imports to come and subsequently lowered the cost of goods and services. When compared to the conditions in 2022, the differences are obvious.
With global supply chain disruption from the Russia-Ukraine conflict, gas prices have been on an upward trend. The Northern Trust’s Carl Tannenbaum remains confident that there is still a possibility for the US government to execute a soft landing in this situation.
As per Tannenbaum, “None of this is to suggest that a soft landing is impossible this time around. But the degree of difficulty is much higher than it was 28 years ago.”
Ryan Detrick from LPL Financial said that a big bounce-back rally should happen. He further stated that the stocks have been doing poorly recently, and this is due to the internal and external factors that caused prices to rise.
The future of markets is looking bleak, with more than half of US corporate executives feeling glum, this amid the multitude of problems faced by both global and domestic landscapes.
However, the Federal Reserve and the government are doing everything in their power to prevent a recession from happening, but experts predict one is highly likely.
