MOLINE, Ill. — So far, 2022 has not been kind to the U.S. Stock Market … or anyone who invests in it.
After the closing bell on Jan. 21, the S&P 500 was down nearly 6%, the Dow Jones Industrial Average was down nearly 5%, and the tech-heavy NASDAQ was down nearly 8% - its worst start to a new year since 2008.
GMQC Financial Expert Mark Grywacheski from the Quad Cities Investment Group says this sell-off is from "the expectation that the U.S. Federal Reserve will have to become a lot more aggressive in raising interest rates to keep this rising inflation in check."
To put that into perspective, just two weeks ago, inflation hit a 40-year high of 7% and that's concerning:
"If inflation starts getting too high, it risks a sudden collapse in consumer spending because people simply can't afford things anymore," Mark explains. "And it risks sending the economy into a recession.
By raising interest rates, the Fed tries to 'disincentivize' buying goods/services on credit. You're now going to be charged a higher interest rate to borrow money- credit cards, banks loans, home mortgages. The goal is to gently tap the brakes on consumer spending. And if there's less consumer spending, it should lead to a gradual reduction in prices, and ultimately inflation."
Mark expects the Fed to raise interest rates 3 to 4 times in 2022 and 5 to 6 times throughout 2023-2024.