Why the stock markets is falling … fast?
As of market close on Thursday, the S&P 500 is down 1.7% for the week, the Nasdaq Composite is down 2.5%, and the Dow Jones Industrial Average is down 1.7%.
The stock market is falling and I want to know why. So I spend an hour ressearching and here in this article I share what I have found so you can understand in just 3 mins and save the hour and effort.
In summary,
U.S. and global stock markets are heading for a losing week because of mainly another interest rate increase accompanied by updated economic projections from the Federal Reserve, also partly due to soft consumer shopping data, and fears the economy will dip into a recession in 2023.
On Wednesday, Fed Chairman Jerome Powell announced a 0.5% (50 basis point) interest rate hike, following 0.75% increases at the previous four meetings. This latest increase brings the target federal funds rate up to 4.25% — 4.5% — the highest in 15 years.
While most of us were expecting that increase, it was Powell’s comments reiterating the Fed’s ongoing commitment to a 2% target for inflation and warnings the terminal target funds rate range may be higher than previously anticipated — 5.1% by the end of 2023 — that sent stocks falling.
“We still have some ways to go,” quoting Powell “Reducing inflation is likely to require a sustained period of below-trend growth and some softening of labor market conditions.”
Which means: Higher interest rates for longer than expected, and this spooked investors and the market.
Powell reiterated that “the historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done” which stoked fears of overtightening to the point of economic recession.
Regardless of what the market does through the end of the year, what is sensible to do is to stay the course and dollar-cost averaging toward your long-term investment goals.
Even — and especially — when there’s volatility in the stock market, the best course of action is to be aware, but stick to your investing plans.
It’s impossible to time the market, and historically speaking, it’s always recovered.
So stay the course through the dips and peaks, and remember why you’re investing.
Connie is a modern motivational and execution expert, an entrepreneur, a teacher, a writer, and a business consultant in human development. She teaches the basic principles of achievements to help people become “successful” in their own terms and having it all. Studying materials by Earl Nightingale, Wallace D. Wattles and Napoleon Hill has inspired her to think in a certain way to live a prosperous life. She has become a self-made millionaire in 2022 while the world is in a COVID recession.
*** There is an Easy Passive Investing for Busy Professional course taught by Connie, in case you want to learn how to invest for early retirement with just 5 mins a month.
