Dow Jones suffered a 2.82% daily loss when the Federal Reserve Chairman, Jerome Powell, expressed that there would be a 50 basis point hike in interest rates that could be discussed at the central bank’s next meeting in May. This caused investors to be concerned about several things, such as the rising bond yields, slow corporate profits, inflation, and the war in Ukraine. The International Monetary Fund recently lowered the 2022 global growth forecast from 4.4% to 3.6%. The markets can rebound this week with corporate earnings reports from some companies like Apple, Amazon, and Microsoft. House prices are still increasing and jobless claims are decreasing, which shows that the economy is still strong.
If the GDP report that comes out this week shows growth higher than the forecast of 1.1%, then the economy is not slowing down as much as expected from the 6.9% pace from the fourth quarter. According to some analysts, a repricing of stocks is currently happening due to the rising interest rates. The Fed meeting in May is expected to increase its interest rate hikes to the 50 basis point level. They are also expected to announce the start of a plan to decrease the $9 trillion balance sheet that occurred due to the COVID-19 pandemic.
https://www.usnews.com/news/economy/articles/2022-04-25/economy-markets-in-crosshairs-this-week-as-feds-new-anti-inflation-stance-gathers-steam
There is much to be concerned about in the market as the Fed continues to increase interest rates. Hopefully the Fed can continue to effectively manage interest rates without increasing them too much too fast. If not careful we could potentially see ours selves right in the middle of a recession.
ReplyDeleteThe rising interest rates are damaging the country and making it worse for it. I think the Fed should manage to stabilize interest rates so the financial market can be stable. With the ongoing scenario, it would not be an exaggeration that if the current situation in the US continues, it will cause problems for the country. The US has just managed to recover from the pandemic, and the ongoing war, inflation, unemployment, and interest rates are alarming and a sign of an economic downfall.
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