Why Did The Stock Market Go Down Today: The Federal Reserve’s policy change leads to drastic changes in the financial markets. It’s because geopolitical factors can complicate the way the global economy works. Why did the stock market go down today? It’s because of these changes.
The stock markets are seeing huge losses due to the wider implications of the Federal Reservice’s decision. A few weeks ago, the Federal Open Market Committee decided on the biggest Fed rate increment that has happened in the last 20 years. They raised the rates of the funds by 50 bps (basis points) with a range of 0.75% to 1%. Previously, there was a hike of 25 bps in March.
The stocks rallied earlier a few weeks ago and suffered the largest single-day drop since the start of the pandemic. This head-spinning volatility is changing the way the market works.
Why Did The Stock Market Go Down Today?
Let’s see what else is driving the wild swings in the stock markets, making them go down.
The Policy Change
Why did the stock market go down today? Well, the main reason is the policy change by the Fed. The stock markets were accustomed to the loose monetary policy that the Fes had during the past 2 decades. However, now that the central bank is trying to slow down the economy by pulling back, incesters and marketers have no idea how to react. They are having a hard time processing such a big change.
Supply constraints and oil prices spike
There are profound changes in the global economy as of now due to certain supply constraints and a spike in oil prices. As per research, the US financial conditions’ tightening is leading to the rebalanced risks to the Fed’s mandate.
Fall of tech stocks and crypto prices
The fall of crypto prices is noticeable. Even the global powerhouses and startups are facing troubles. You would remember how the share prices of Meta, Netflix and Peloton are substantially down in 2022. Some strategists are of the view that this could fall more. There would be a more than 60% plunge in crypto and a 25% drop in tech stocks. All this is also affecting the stock markets. It explains why did the stock market go down today.
Inflation
High inflation is present as of now. The Fed made its decision due to the four-decade-high inflation. Depending on the situation where there is a slow down of goods’ demands and supply concerns ease, inflation will stay. It will be in moderation for the entire year. That’s why there are more swings in the stock markets.
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In the entire US and across the globe, inflation is the biggest problem. The inflation rate in the US alone is the highest in the last 40 years. The Fed is making certain decisions to combat inflation and get the prices back under control. Although these measures are crucial, they are also leading to nervousness in the stock markets.
Investors and Stocks
Currently, there are several reasons why investors may think of backing down from the stocks as of now. The rising prices and increasing interest rates can be problematic here. Furthermore, the China lockdown and Ukraine war situation also led to a hamper in the supplies of everything from energy to food. All this led to inflation issues.
The Bottom Line
The stock markets are suffering due to the current global issues and uncertainties. When this issue ends, the current market volatility has stood out and was actually placid for years. Hopefully, these swings in the stock markets may become better when the inflation rates go back to normal sooner.
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