I hope this helps those anyone trying to understand what's going on in the markets. Please let me know if anything is not accurate, and any feedback whatsoever is greatly appreciated.
5 reasons the markets are on a tear, is due to being driven by of worries about:
- rising interest rate hikes through 2022 and the Fed's monetary tightening
- slowing economic and earnings growth (Growth was negative for the U.S. in the first quarter)
- the ongoing war in Ukraine
- a slowdown in China’s economy due to new COVID lockdowns
- high inflation (both domestically and globally)
These 5 drivers have led to:
- higher commodity prices worldwide
- worries around supply-chain issues (which will continue)
Please note:
Historically, the Fed raising interest rates have often led to a recession. One of the best indicators of a recession, is the stock market itself. This sort of a drop in markets can signal that a recession is coming.
- The S&P 500 is an index that tracks the 500 stocks of mostly the largest U.S. companies. It’s a barometer of the health of corporate America and is considered one of leading indicators of the U.S. economy.
Hypothesis/ Conclusion:
I believe, the Stock Market drop will continue until there's enough economic data to prove that inflation is under control. Emotions are driving the markets right now, and human emotions are a difficult thing to predict. Expect volatility ahead.
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