For the first time in nearly two years, the stock market crossed into bear market territory this week. Here's what that means for consumers, investors, and the U.S. economy
f you invested pandemic-era gains into the stock market, or own a 401 plan, get ready for an anxiety-inducing ride. For the first time in nearly two years, the stock market crossed into bear market territory this week as inflationary concerns have sent the S&P 500 spiraling down more than 20% from its record high in early January.sharp selloff of stocks
Such steep downturns are relatively rare, only occurring 14 times since World War II, including this one. Once previous bear markets had begun, it took an average of 19 months for stock prices to stop falling, according to an. But some take less time. The last bear market carried on for only 33 days, from mid-February to late March of 2020, at the start of the Covid-19 pandemic—the shortest bear market since World War II.
With inflation at its highest levels in 40 years, fueled by rising food and energy prices and the war, the Federal Reserve raised interest rates for the first time since 2018 in an attempt to get prices under control. Such aggressive moves from the Fed tend to make investors anxious, because it makes borrowing more expensive for corporations and households, which can thereby stifle economic growth and potentially lead to a recession.
“The only way to stop inflation is to reduce demand and make the labor market less tight,” says Victoria Greene, chief investment officer at G Squared Private Wealth. But even if that happens, and consumers cut back on their spending habits, it could have a trickle down effect on the economy and result in employee layoffs—all signs of recession. “Consumers are already buying less electronics and home goods and buying more staple goods,” Greene adds. “The U.S.