Since then, neither the S&P 500 nor Tesla have reached the peak they reached on January 3. The S&P 500 will begin its final trading session of the year on Friday, nearly 20% lower than today. That’s — and this year is supposed to be the worst. performance since 2008. Crypto giants like FTX has droppedand debt is not cheap anymore.
Frequently asked questions about inflation
What is inflation? Inflation is a Loss of purchasing power over time, which means your dollar won’t go as far tomorrow as it did today. It is usually expressed as an annual change in prices for everyday goods and services such as food, furniture, clothing, vehicles, and toys.
But even as the US economy heads towards a possible recession, the Federal Reserve has said its job is to further. Inflation, while beginning to cool, remains too high, and interest rates are expected to rise further, heralding more difficulties to come.
“Central banks have driven the market this year because of inflation and that will continue into 2023,” said Kristina Hooper, director of global market strategy at Invesco. very, very dramatic moment, making history. We’ve all witnessed a chain of events, starting with the pandemic, that’s been extraordinary.”
The Fed’s challenge became even more difficult in late February, when Russia’s invasion of Ukraine sent food and energy costs soaring, creating a crisis in poor countries dependent on imports. oil and grain exports. In March, the Fed started raising interest rates.
Higher interest rates are central banks’ primary tool to combat inflation. By raising interest rates, borrowing costs also increase, slowing demand in the economy and theoretically reducing further price increases. Yields on 10-year US Treasuries, which support borrowing costs globally, have risen 2.3 percentage points this year, the biggest annual gain on record for data from 2015. 1962. In contrast, interest rates on mortgages, corporate bonds, and other debt rose higher.
Higher costs also mean lower profits for companies, driving down stock prices. That’s especially true for technology companies, whose growth is supported by low interest rates. The Nasdaq Composite Index, which is filled with tech stocks, is down more than 30% in 2022.
As investors lost money in the stock market, and households faced skyrocketing costs due to inflation, the air came from other speculative markets as well. The price of Bitcoin, one of the most popular cryptocurrencies, has dropped and so-called meme stocks like GameStop and AMC Entertainment, whose stock prices have been pushed higher during the pandemic by a group of investors new amateur investment, has steadily declined throughout the year.
