The S&P 500 (SPY) is down 17.3% for the year after being down more than 20%. To say 2022 has been a tough year for investors would be an understatement. Second, some of them provide meaty dividends as well.
First, all of them have strong near-term growth prospects. But if it becomes clear the Fed isn't getting a handle on inflation, all bets are off.If you are looking for the best growth stocks to buy now, this list of stodgy stalwarts from top sectors is worth checking. If, in a few months, there are indications that the Fed is succeeding at bringing inflation under control, markets will stabilize. There is a huge desire, among policymakers and politicians especially, to see changes immediately, but to everyone's frustration, it will take time to see if the Fed's medicine is working. Speaking at a European Central Bank conference on Wednesday he said: "Is there a risk we would go too far? Certainly there's a risk." If the Fed's interest rate increases cool the economy too much, it could lead to a deep downturn and even a recession.Įven Powell doesn't discount that.
economy and policymakers are aware there are risks. The Federal Reserve is administering tough medicine to the U.S. But can the Fed wrestle inflation down, or will its actions lead to recession? That includes reports on the jobs and inflation from the federal government, but also quarterly earnings from companies. Like everyone else, she is paying close attention to economic data. She is not among a growing number of portfolio managers who think we will see a recession in the next six months. "Maybe not today's 8.6%, but still much higher than the pre-pandemic level."īusiness Gas hits $5 a gallon for the first time. "Inflation is going to be higher for a longer period of time," says Gargi Chaudhuri, head of iShares investment strategy at BlackRock. Some believe that will be necessary to deal with higher inflation going forward too. This year's dramatic rate increases are a reflection of the Fed playing catch-up, but some fear that it also signals the start of a new era of higher interest rates after over a decade of easy monetary policy. "I think I was wrong then about the path that inflation would take," she told CNN. A few weeks ago, Yellen admitted she had misread the moment. Now we know that they were both underestimating the path of inflation and were slow to act. emerging from the darkest days of the pandemic. Those expectations were also dramatically different from last year, when both Fed Chair Jerome Powell and Treasury Secretary Janet Yellen seemed confident inflation was going to fade - that it would be a short-lived consequence of the U.S. kept surpassing expectations." The Fed first underestimated inflation and is now playing catch-up
Yung-Yu Ma, the chief investment strategist at BMO Wealth Management, says it has been a "very fast-moving environment, where inflation continued to surprise to the upside, and the Fed's own projections of how quickly it was going to raise interest rates. economy into a recession.Įconomy The Fed delivers biggest interest rate hike in decades to combat surging inflation "It changes the math of buying a car, buying a house, buying a bond, and it changes the value of particularly tech stocks, whose earnings are far off in the future."Īnd that means that all that whipsawing on Wall Street of the last few months - including the massive single-day swings of more than 1,000 points - reflects real nervousness among investors. "When interest rates go up, it changes all the math," says Charles Bobrinskoy, vice chairman of Ariel Investments. Both indexes are in bear market territory, and the Dow Jones Industrial Average is in a correction. With the Federal Reserve aggressively hiking interest rates to fight high inflation, the economic landscape has changed dramatically.Īt the halfway point of the year, the tech-heavy Nasdaq has fallen by 30% and the broad-based S&P 500 is down by over 20%. This has been the worst start to a year for stocks in more than half a century.Ī record-setting run fueled by cheap money has ended, and Wall Street is having a hard time adjusting to a new reality. Traders work on the floor of the New York Stock Exchange.
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