A wave of massive selling was prompted by investor fears that the global economy might fall into a recessionaround the world on Friday.
The Dow Jones Industrial Average, the S&P 500 and the Nasdaq all lost more than 1.5% on Friday, with the Dow closing at its lowest level since late 2020. The S&P is down 23% since its January peak.
As Michael George writes on CBS Saturday Morning, raising interest rates with the aim of lowering inflation has a ripple effect on the economy. On Friday at the New York Stock Exchange, the head of a company called Sustainable Stock Development oversaw the conclusion of what had been a terrible 486-point day, preceded by a terrible week.
The market has fallen more than 5,000 pips in 12 months, with a loss of more than 1,000 pips this week. And there are more storm clouds ahead, according to UC Berkeley economist James Wilcox.
“It is very likely that we will see a recession, and the probability of that has been really rising all year long, especially since the summer where the Fed has been very aggressive about raising rates,” he said.
And the Fed’s triple interest rate hike in 2022 has made it more difficult to borrow for businesses that want to grow, and for consumers — especially those hoping to own a home. Average 30-year fixed-rate mortgage rates have risen from 3.3% to 6.7% over the past nine months thanks to Fed increases.
“It’s very hard to know how much higher mortgage rates are, but I think we can still see some other interest rates, auto rates, credit card rates, which are going to make it more difficult for people to buy new cars or to buy cars,” Wilcox said. Expensive”.
In all of this, White House Press Secretary Karen Jean-Pierre addressed the economy on Friday.
“That’s why we passed this, that’s why the Democrats in Congress passed the Inflation Reduction Act. By the way, none of the Republicans supported it,” she said.
The White House also points to gas prices, which have fallen dramatically over the past few months, and one part of the economy that is still going strong: the labor market. The unemployment rate was 3.7%.
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