(Washington Insider Magazine)-Although the first few months of 2022 showed promise with a stock market rebound, recent drops have sparked fear once again. Many are wondering how much further the stock market drops will fall. Will history repeat itself?
Earlier this year, the stock market suffered a loss but recoiled its 20% drop with a successful rally. This past week has shown that the pull to drop again isn’t out of the question. Stockholders perpetuate the fear of another decline due to recent inflation and borrowing costs increasing.
The Dow Jones Industrial Average flirted with bear market territory this past week by falling 700 points. S&P ended the week in red, as well as Nasdaq. This steady decline continues to send shockwaves on Wallstreet reminding them of the historical 89% drop in 1929.
Is the stock market failure a result of inflation? The Biden Administration is working hard to launch the economy forward by signing laws that will protect the American people. The Inflation Reduction Act will wrestle against the impending climate change and incorporate a larger tax on wealthy corporations, presenting the opportunity to reduce the price of health care and prescription drugs.
The Biden Administration began 2022 on the heels of a healthy 2021 growing economy. However, when inflation began to rise after the first part of 2022, the growth stopped, and the market changed. As a result, the United States economy slowed significantly and both stocks and bonds suffered accordingly. Although inflation has caused a dip in economic growth, other factors have also contributed. Federal policy changes have directly impacted the economy, as well as the war in Ukraine.
The hope of implementing these laws is to help America strengthen the economy. Regardless, stocks and bonds are always directly affected by the economy whichever way it leans, and experts agree that 2022 may continue the bumpy road for the remainder of the year. If The Biden Administration is correct with the outcome of signing the Inflation Reduction Act, the result will be a healthy economy and the stock market will reflect it positive growth.
