Fear mounts as inflation rises, S&P 500 officially in bear market

view original post

The S&P 500 is now in a bear market after the index lost 4 percent Monday, putting it 21 percent below its peak in January.

Wall Street has been going through withdrawal since the impacts of rising interest rates and high inflation.

[TRENDING: 7th Haitian delegate vanishes from Special Olympics in Kissimmee | Dozens of trucks towed, hundreds of citations issued in Daytona Beach Shores truck meet, officials say | Become a News 6 Insider (it’s free!)]

The war in Ukraine and a slowdown in China’s economy is also prompting investors to reconsider the prices they are willing to pay for stocks.

Jill Schlesinger, CBS business analyst, said the weeks leading up did not look promising.

“Today’s selloff comes on the heels of a pretty bad ten weeks. Stocks have been down nine of the last ten weeks, and on Friday, we got an inflation report that ran pretty hot,” Schlesinger said.

She said she thinks investors fear higher prices, and rising interest rates are going to keep eating into corporate profits, and so consumers will not be able to maintain their current level of spending.

Schlesinger said calling this a toxic combination is an understatement. If companies begin losing money, investors may be scared into selling stocks as corporate losses bleed over into their stock’s value.

“The fear among investors is that — as the Federal Reserve gets set to meet this week — the central bank is really going to have to start to raise interest rates by more or more often than it initially thought, and it really does lay bare the problem with the federal reserve right now,” Schlesinger said.

If rates are raised too high or too quickly, experts said it could cause a recession.

Economists say the Federal Reserve may be raising interest rates to accomplish this, as a recession could push down on demand, causing people to spend less and bringing the value of the dollar back up.

Schlesinger says investors should not let the numbers scare them into pulling out stocks — a bad idea, as short-term losses of stock value could be overridden by long-term gains.

“You shouldn’t just blow out of your stock position just because of what is happening today or tomorrow, even in six months. Most people who are investors are investing for the long term. They are thinking about their retirement in 10, 20 or 30 years,” she said.

The Federal Reserve is scheduled to make its next policy announcement on Wednesday.