A turbulent week on Wall Street that began with stocks Enter the bear market It ended with a slight rise on Friday, the second time during the pandemic. After a cruel period, it was almost uncomfortable for investors who have seen the value of their portfolios and retirement funds declining.
The S & P 500 rose 0.2% on Friday, but ended the week with a loss of 5.8%, the 10th decline in the last 11 weeks and the worst weekly performance since March 2020. World economy.
The sale is driven by sustained high inflation that undermines people’s purchasing power and hurt corporate profits, raising the sense that the Fed’s efforts to beat it at higher interest rates are hampering growth. .. By making it costly to rent a house, invest in a business, or do other debt-related things, the Fed can cool demand and slow down price increases, If you go too far, you can put your economy in recession.
Wall Street is months ahead, but it’s been pretty dark after the government announced its latest reading. Consumer price index last Friday. Inflation was found to be accelerating again in May as prices rose at an annual rate of 8.6%. Some investors have begun to expect inflation to slow, and the report has shaken them from that perspective.
By Monday, a full economic panic had emerged and stocks had plummeted by nearly 4%. This is partly due to the news that the Fed is considering an unusually large rate hike when it meets later in the week. Due to the fall on Monday, the S & P 500 fell more than 20% from its January peak, 7th bear market in the last 50 years..
“It’s all part of one story, it’s inflation,” said Aswath Damodaran, a professor of finance at New York University. “We will see a big decrease in days and days until we know where we are going to fall into inflation.”
Stocks rose, the largest temporary rise since 1994, when the central bank raised its policy rate by 0.75 percentage points on Wednesday. Investors seemed comforted by the Fed Chair Jerome H. Powell’s guarantee that policymakers were “not trying to cause a recession.”
My feelings didn’t last long.another Rapid decline More than 3% on Thursday reflect concerns that a more aggressive Fed could actually cause a recession.
Analysts say the turmoil will not end until investors see signs that inflation has begun to peak, or the Fed has begun signaling the end of a campaign to combat rising prices. That’s probably a distant result.
On Friday, Powell said, citing levels well below current inflation, he and his colleagues “are in a hurry to return inflation to its 2 percent target.”
Investors who have been reassured that policymakers are taking positive action to curb inflation and fearing the impact of those actions on economic growth are betting on continued turmoil. There is. One measure of this is the VIX Volatility Index, commonly referred to as the “Fear Index”, because it tracks investor demand for the types of financial instruments that provide protection against market declines. It has more than doubled in the past year.
Inventory sales are wide-ranging. Of the 11 corporate sectors of the S & P 500 10 of the year is in the red.. As a group, only energy companies are higher. Their interests come when oil and gas prices soar, first when people return to many pre-Covid activities, and then when Russian energy becomes unmanageable after the invasion of Ukraine. I did.
Equities are probably the most widely understood indicator of the financial mood, but other markets have also been shaken significantly.
Cryptocurrencies that some believe should act as shelters in times of inflation and turmoil Horrible time.. Bitcoin has lost nearly 30% of its value this week alone, dropping to its lowest level since 2020. Some of the biggest players in the crypto industry such as Coinbase, Gemini and Crypto.com Announcement of layoff.. CelsiusThe experimental crypto bank suddenly stopped withdrawing.
With cryptocurrencies and stocks, investors can lose more money before things get better.
“I still have pain,” said Damodaran.