As the jobs report ended the week on a high, many fear the Feds will only increase interest rates in order to curb a looming recession.
As the jobs report ended the week on a high, many fear the Feds will only increase interest rates in order to curb a looming recession. This made the stock market hit another all-time low as investors worried about the rate increase. However, stocks were able to finish stronger than they have been.
According to CNN, the Dow is now super close to entering a bear market as it is 20% below its all-time high. A bear market is defined as a prolonged drop in investment prices. And, what typically happens is as prices are low, more people decide to invest. When this happens, it tends to help turn the tide from a bear market to a bull market.
Bear markets are clearly defined by increased pessimistic attitudes and negative feelings toward investments. And, investors will tend to ignore any good news and will continue to sell quickly. This pushes prices even lower. Over the last couple of months, it seems all we’ve heard is bad news about the markets and interest rates.
Although the fact that the jobs report was positive, it happened to have a negative result for the rest of the market. Because no one thought jobs would bounce back so quickly, this will more than likely cause the Federal interest rates to rise, yet again. The strategy in doing so will hopefully curtail a recession.
Although that may work, in doing so, other countries’ currency strength will tumble as well, making the dollar strong again. If the Feds do increase interest rates again, it will become harder to refinance home loans (or even get a home loan), harder to pay off credit cards (or even open one), and payoffs of current credit cards could seem impossible.
Interestingly, when the interest rates rise, your savings account may see a bit of benefit. It will cost more to borrow money, but your savings account interest rate rises to help you build up your savings. When you have a savings account at a bank, you are letting the bank borrow your money. This may be an impossibility for those who are in the throes of natural disasters and are trying to bounce back.
So, it’s definitely a good time to save as much as you possibly can and put your money in a saving account. Banks may even start to increase their savings account rates in order to attract more new customers. Other banks will then start to compete against each other while interest rates are high.
However, this recent interest rate hike has been the toughest policy move since the 1980s in order to fight inflation. More than likely US residents will face more economic woes since it will become harder to pay off credit cards and even look into getting new ones.
This is the fifth time this year that the federal interest rate has increased. In addition, the federal reserve itself has said that this strategy may not even curb a recession or how bad that recession could be. In addition, this move indicates that interest rates may stay high for the long term.
According to experts, consumers are now spending $460 more per month on groceries than they were this time last year. However, the job market remains steadfast and consumer spending is staying strong.