Market In Bear Territory As Investors Weigh Rate Hikes

The markets continue to suffer as Americans remain pessimistic about the economy, executives predict a recession, and investors fear Fed rate hikes will do too much damage to the economy.

The Dow has fallen more than 800 points, and the S&P hit bear market territory at 3,779.05 while the NASDAQ composite index fell over 400 points, or 3.6%, to 10,932.

These figures show investors are growing increasingly nervous about the pace at which the federal reserve is going to raise interest rates. The Fed has announced a series of rate hikes are on the horizon to address inflation.

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The latest inflation data released Friday showed the most significant price increases in four decades.

Investors will know more when Federal Reserve Chair Jerome Powell speaks on Wednesday, but in the interim, there are growing concerns that the U.S. economy is heading into recession.

The Conference Board Measure of CEO Confidence released last month shows business leaders have been predicting a recession for weeks.

“Notably, nearly 60 percent of CEOs expect inflation will come down over the next few years,” the survey said. “But they also believe that the interest rate hikes that will tame inflation will cause a recession—albeit, a very brief, mild recession that the Fed offsets.”

Ongoing fear over record high gas prices and the highest inflation in 40 years has shaken Americans’ confidence in the economy. Surveys show they aren’t expecting a quick turnaround.

The Federal Reserve Bank of New York said Monday that more Americans are expecting higher inflation.

“US consumer inflation expectations for the year ahead rose to 6.6% in May of 2022 from 6.3% in April, the same as a record hit in March,” the group said. “After declining sharply last month, the year-ahead expected change in the price of gas rose slightly to 5.5% in May. On the other hand, the expected change in the price of food, medical care and rent all fell by 0.1 percentage point to 9.3%, 9.4% and 10.2%, respectively. Similarly, the median expected change in the cost of a college education declined by 0.5 percentage points to 8.6%. Meanwhile, the median three-year-ahead inflation expectations remained unchanged at 3.9%.”

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