The stock market closed out a week of intense losses with the Dow Jones falling more than 750 points Friday, entering bear market territory amid a wave of investor fears.
At time of writing, the index had, at its lowest point, fallen more than 2.7% during the day to around 29,300 points, with the Nasdaq and S&P 500 down by 2.7% and 2.64% respectively at time of writing. With the Dow Jones officially falling more than 20% from its recent peak in June, stocks will have entered a slump known by investors as a “bear market” if the losses hold when trading ends Friday, according to CNBC. (RELATED: Stocks Stay Volatile As Recession Fears Loom)
The Nasdaq was down by 30.92% this year, with the S&P 500 down 22.98% this year, as of close of business yesterday, according to data from MarketWatch.
“Stocks were overvalued because their nominal price has been fueled by the inflation of the Federal Reserve,” Heritage Foundation economist E.J. Antoni told the Daily Caller News Foundation. “As soon as the Fed took away the punch bowl… what happened? Stocks immediately took a nosedive and are continuing to do so, because the only thing that has been fueling this economic recovery hasn’t been real growth, but again, money creation.”
This Great Bond Bear Market is “thus far a doozy,” with the worst losses since 1949, 1931 & 1920: BofA’s Hartnett. This “threatens credit events & liquidations of the most crowded trades,” long dollar, PE, big tech. “True capitulation is when investors sell what they love & own” pic.twitter.com/R3CSUXTJNo
— Lisa Abramowicz (@lisaabramowicz1) September 23, 2022
After wavering early this week as investors awaited the Federal Reserve’s Wednesday announcement of a third interest rate hike in just four months, stocks tumbled, with Goldman Sachs warning clients that investors are preparing for recession and slashing its expectations for the S&P 500 stock index by 16%.
Federal Reserve Chair Jerome Powell has been clear that he is willing for there to be some economic “pain” in order to combat inflation, even as the Biden administration touts its economic record.
Antoni noted that major market moves such as this are typically driven by the “institutional investment class,” and that individual retail investors typically got crushed unless they had “incredible foresight.” Unless retail investors had an immediate need to sell, Antoni cautioned against doing so, urging retail investors to weather the panic.
“Now we’re faced with the reality of having to do it the hard way, of having to actually grow the economy and not just grow the money supply.” Antoni said.
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