The 2022 Stock market crash is worse than anyone realises, some call it a slow train wreck which is not untrue, but at the end of the day there is no stopping this disaster. A dramatic sell-off continues to pick up sending indexes to bear market territory( When stocks trend 20% below their recent high) . While bubbly stocks face a free-fall, that only rivals the downturn witnessed during the dot com bubble, the investors are panicking as inflation continues to sore, despite the federal Bank’s trying to control the interest rates. This means even higher interest rates are coming ,this also means the sharper losses are ahead for stocks
Stock markets have been facing a sell-off, after very disappointing consumer price index reports, which means the inflation is getting horrible in the US, The latest CPI data shows that the inflation got even higher in May, the largest increase since 1981. But when the very economic indicator is pointing to an economic slowdown, a major event has occurred. According to the University of Michigan, US consumers’ confidence in the economy has slumped ( at an all-time low ). For an overvalued Stock market, The Bank of America says that the bear market rally is over and investors are expecting more shocks from inflation.
Given that inflation is an undeniable reality, the natural gas has increased by 141%, fuel by 91% and oil when up by 61%, and food by 39% in the US, that brings back to answer the question “ where is my bear market rally gone “, The stocks will be unable to bounce back, because we haven’t seen the worst of inflations yet, The massive slowdown in economic growth is going to continue.
So the far market is also expecting that the target federal rate will be around 2.75 % and more by end of 2022.
For now, the experts on wall street feel that the sell-off is likely to accelerate, The fact that the dollar is gaining, means investors are looking for safe havens to invest in.
The S&P 500 drop is almost as bad as the 2000-2002 Market crash, in other words, value corrections to valuation are now happening 3 times faster than the bursting of the internet bubble.
It reflects that the much stock market rally during the pandemic was due to the feds printing money and lowering interest rates, once the central bank turned hawkish the collapse came. When the easy money disappears the bubble disappears, the foundation of the bubble in the 1990s was market psychology about growth prospects and equity ownerships, which are not easy to deflate, the current bubble was mostly on speculation and artificially suppressed interest rates.
We have to remember this has been a miserable year for US stocks and therefore world capital markets too, with S&P 500 and Nasdaq falling 30% YTD. However, the experts say that these drops will pale in comparison to what’s coming next.
But although there are differences between today’s market and the past, disregarding the possibility of a brutal sell-off is a huge mistake, People have a short memory and lack of respect for history in general.
If this continues, it is just not that rich investors will lose money, even workers& pension funds, etc will lose money if they heavily rely on stocks,
“ They have bolted the lifeboats to the titanic and the lifeboats are going down with the titanic “ – overheard somewhere.
Simply put, we may be on the verge of an economic catastrophe, unlike anything we have ever experienced. We are already in a technical recession, and most people just don’t realise it yet as consumer spending hits the wall. Every Major bank, Morgan and Stanley, Deutsche Bank, and Goldman Sachs are forecasting a recession for the next few years, The House of cards is coming down …..The Meltdown has just begun.
Written By: Ankur Kushwaha, Consultant, Invest Punjab | Govt of Punjab