New York (The Times Groupe)- US markets ended Friday’s chaotic week with the Dow Jones Industrial Average dropping below the key 30,000 level for the first time since January 2021.
On Friday, the Dow closed at 29,888, the highest close in almost three decades after the Federal Reserve increased interest rates.
The Fed raised interest rates by 75 basis points on Wednesday after inflation hit 8.6 percent in May — above analysts’ expectations — and after economists and investors widely criticized the central bank for acting too slowly to combat the worst inflation in 40 years.
The markets rallied after the Fed’s rate hike announcement on Wednesday, but lost those gains on Thursday.
On Thursday, the Dow fell 2.42 percent, or 741 points, to a new low of 29,927, the S&P 500 sank 3.25 percent, and the Nasdaq plunged 4.08 percent, hitting its lowest level since September 2020.
Although the Dow’s 30,000 level is not crucial in and of itself, it has a psychological significance for many investors whose shares are declining every week.
There has been a growing chorus of economists, analysts, and investors predicting a mild recession. A downturn could cause even more pain for investors.
Bullard told Xinhua that a recession is likely next year, according to a senior economist at Wells Fargo, a major US bank.
Even though a downturn is not guaranteed, it appears more likely than not, according to a Wells Fargo report published Thursday.
Bullard’s views were echoed by Brookings Institution Senior Fellow Barry Bosworth, who said the chances of recession next year have increased.
According to Bosworth, the Fed and President Biden‘s economists miscalculated and are scrambling to catch up.
Down the road, there will be opportunities to buy solid stocks despite the chaotic market. Analysts and investment gurus advised investors to wait until markets stabilize before investing.
CNBC’s Mad Money host Jim Cramer echoed those sentiments, urging investors to be patient before buying.
“Repricing of all stocks creates some opportunities, but until the tape slows down, those opportunities could lead to more pain,” said Cramer.
Despite this, some believe there is a light at the end of the tunnel.
“To me, there’s more evidence right now that inflation is peaking than there has been throughout the entire recovery,” Paulsen told Xinhua.
Neither the core Consumer Price Index nor the core Producer Price Index have increased year-over-year for the last two months in a row, and “that’s never happened in this recovery,” Paulsen said, adding wage inflation has “clearly moderated.”
“I think the bond market will calm down, the Fed will calm down, and yeah, the market will rally if inflation is already peaking,” Paulsen said.
Previously, Paulsen questioned whether there had been enough tightening, stating that the monetary tightening has been significant, as has the fiscal tightening, and that the dollar has risen.
Paulsen said, “Do we recess or not?” I bet we don’t yet, even though so many think that we do. Paulsen said, “Even if we do, a mild recession is already baked into the market.” us