A wave of heavy sales fueled by investor concerns that the global economy could slip into recessionFriday around the world.
The Dow Jones Industrial Average, the S&P 500 and the Nasdaq each lost more than 1.5% on Friday, with the Dow closing at its lowest level since late 2020. The S&P is down 23% since its peak in January.
As Michael George reports for “CBS Saturday Morning,” interest rate hikes aimed at curbing inflation are having a ripple effect on the economy. On Friday on the New York Stock Exchange, the president of a company called Sustainable Development Equity led the close of what was a horrendous 486-point drop-day preceded by a horrendous week.
The market is down more than 5,000 points in 12 months, with more than 1,000 points this week. And there are more storm clouds ahead, according to UC Berkeley economist James Wilcox.
“It’s very likely that we’re going to have a recession, and the odds of that have actually been rising throughout the year, and especially since the summer when the Fed was so aggressive in raising interest rates,” he said.
The Federal Reserve’s trio of rate hikes in 2022 have made borrowing more difficult for businesses looking to grow, and for consumers, especially those hoping to own a home. The average 30-year fixed mortgage rate has risen from 3.3% to 6.7% in the past nine months thanks to increases by the Federal Reserve board.
“How much further mortgage rates can go up is very hard to know, but I think we could see some other interest rates, car rates, credit card interest rates, go up, and that will make it harder for people to buy new cars or more expensive ones.” buy cars,” Wilcox said.
In all of this, White House press secretary Karine Jean-Pierre addressed the economy on Friday.
“That’s why we passed it, that’s why the Democrats in Congress passed the Inflation Reduction Act. Besides, not a single Republican supported it,” she said.
The White House also points to gas prices, which have fallen sharply in recent months, and to one part of the economy that remains strong: the labor market. Unemployment stands at 3.7%.