US Stocks Hit Rock Bottom By Falling 2 Percent
A couple of months ago the United States market rejoiced as they celebrated the longest bull market in the history. However, the stock market is now too far from celebrating after stocks managed to hit the rock bottom earlier this week.
Lowest in 14 months
Investors have expressed their deepest concerns over how low the stocks went after it closed to a 2 percent fall that made it a record-breaking moment in the worst possible way. Investors are now fretting over how the global economy would go especially after the final policy meeting of the Federal Reserve for 2018.
The fall involved a massive sweep through energy, materials, tech, and even on the financial sectors which led to Wall Street had to go through correction territory. According to JPMorgan Asset’s chief global strategist David Kelly, this shouldn’t be a shock since the decline was something that has been going on for the past couple of weeks. This doesn’t just concern the economy of the United States, but the entire world as well.
It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!
— Donald J. Trump (@realDonaldTrump) December 17, 2018
Last Monday, S&P 500 was down by 2 percent overall and every single sector ended up having red on the boards without any green being seen. This is known to be the biggest decline since ten years ago. Some investors believe that this could be a massive effect of the trade wars between China and the United States, despite the temporary truce that they agreed on while in a meeting in Argentina last month.
This also said to have made an impact on the rise of the interest rates that was done by the Federal Reserve, which is said to be a potential treaty to the overall economic outlook. United States President Donald Trump made a statement via Twitter how he thought that it was a bit surprising that the Federal Reserve was even considering a hike on the rates after what is going on with the stock market at the moment.
Trump may think of it as a victory, but the people are worried about how this may actually affect the economy of the country, especially with the possibility that the government may shut down because of so many disagreements.
However, some experts think that it would cause even worry if the rates simply stop rising since that would confirm the slow growth of the stocks. With 2 percent falling recently, the S&P 500 went down all the way to 13 percent since September. Neither Nasdaq Composite and Dow Jones International managed to have any of its members to go up and be on the green side. Dow went down by 2.1 percent while Nasdaq fell by 2.3 percent.
Federal Reserve Pause
The Federal Reserve has been raising their rates ever since the economy was doing well and the bull market is at its peak. However, everyone is now waiting for their next move since experts think that they would take a break from raising the rates for now after the stocks dropped by 2 percent. According to an interview with former Federal Reserve governor Larry Lindsey, it is most likely that the Fed won’t raise the interest rates when they make an announcement today.
They have been doing it for months but with what’s going on at the moment, there is a chance that they won’t make it even if it is just a quarter point. Lindsey believes that the Fed must first look into the inflation before raising the rates all because the gross domestic product or the GDP is doing well and that the unemployment rate is going down. What is happening right may be considered as a major sign of declining inflation.
If the Fed announces that they will continue to raise rates, then it will most likely because they are planning on pushing through the mission that they started months ago. Other economists say the economy of the United States at the moment is not that bad that it could handle one more hike, however, if the stock continues to go downhill and the Federal Reserve goes on with the projection of three hikes this coming 2019, then it will totally affect businesses in the country massively.
When asked if they wish to make any comments regarding the reactions and speculations of experts on the said matter, the Federal Reserve chose to remain silent.
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