A massive Wall Street sell-off plunged the Dow into a bear market on Friday as investors resigned to the fact that Fed has given up Will continue for “Soft Landing” Raising interest rates aggressively to fight inflation – even if it means a deep recession.
The Dow Jones Industrial Average fell more than 700 points, while the S&P 500 fell nearly 100, down 2.65% from its pre-market starting point.
The tech-dominated Nasdaq Composite fell more than 300 points, or 2.75%.
The Dow is now 20% off its all-time high – which would officially place it in bear market territory.
“The current numbers are certainly scary,” Brad McMillan, chief investment officer at the Waltham, Mass.-based Commonwealth Financial Network, told The Post. “And really, there’s a lot to worry about.”
Markets were baffled by the Fed’s recent 75 basis points hike as well as the British pound’s sharp fall against the US dollar.
The United Kingdom’s new prime minister, Liz Truss, stunned global investors on Friday when her Chancellor of the Exchequer, Kwasi Quarteng, announced that the government would seek tax cuts and more borrowing in an effort to lift the British economy out of its woes. Will try
The announcement sent stocks, bonds and the British pound to falter – fueling fears of a global recession.
“The market is finally taking the Fed at its word — they are going to cause a recession to fight inflation,” Chris Zacarelli, chief investment officer at Charlotte, NC-based Independent Advisors Coalition, told The Post.
“This is bad news for financial markets and bad news for workers and the economy.”
“Things will get worse before they get better, but they will eventually get better,” Zaccarelli said.
“Unfortunately, it’s going to take time for things to improve.”
McMillan said investors should be prepared for a bumpy ride.
“Fed is” Committed to raise rates till inflation brought under control, which gives rise to a renewed bearishness at present and a reason for caution,” McMillan said. “We can expect the market volatility to continue for some time.”
McMillan said the Fed is relying on a tried-and-tested formula — short-term pain followed by long-term gains.
“The Fed is doing surgery on the economy right now,” he said. “In the short term, it’s painful. But in the long run?”
“It is a healing process and sets the stage for a healthier economy and markets.”