By Brendan Scanland
WASHINGTON, D.C. — The stock market took a plunge Monday amid growing fears of an economic slowdown in the U.S. The plunge follows what analysts have been calling a bullish year.
The Dow dropped more than 1,000 points within seconds of the opening bell on Wall Street. It was the worst day for the Dow and S&P 500 since 2022.
Analysts say the plunge is the result of several factors. Jobs data from last week showed hiring slowing more than expected, the unemployment rate increased to 4.3 percent, Americans are spending less and the Federal Reserve decided not to cut interest rates last week.
Combined, the factors are fueling uncertainty and doubt, two major reasons for Monday’s market sell-off. Tech and bank stocks were hit especially hard.
Experts say it’s hard to pinpoint the exact reason for these market sell offs. There’s consensus that there’s a bit of a growth scare, which is the notion that the U.S. economy is growing much slower than expectations, which could also fuel fears of a recession.
Some experts predict a more short-term impact and encourage those with long-term investments, like their retirement, to be patient.
“For America, people should be optimistic. If you’ve been investing for the long term in the past 240 years in America, you’ve done really well,” said Professor Rodney Lake, Vice Dean for Undergraduate Programs and Director of the GW Investment Institute at George Washington University. “If you’re thinking about ten plus years over a full market cycle, you should sleep well at night and you should keep investing and thinking about the long term,” he added.
Lake says if someone is invested in the S&P 500, for example, they should keep investing, stay the course and continue to focus on long term.
“If you need more money in the short term, it should not be invested in the stock market,” said Lake.
Some are questioning whether the Fed’s decision to maintain rates was the right move. Lake says it’s always a difficult decision.
“This is a challenging job,” said Lake. “To keep inflation out of the system and have full employment, price stability and full employment are their dual mandates. That’s not an easy job to have.”
Trying to curb inflation and get it out of the system is a very tough balancing act. Lake says the Fed is taking a more cautionary approach, which he believes is the right thing to do.
“Even if you’re overcorrecting, it’s very difficult to determine that until it’s hindsight. And certainly to the Fed, it looks like they’re taking this cautionary route, which I think is the way to go,” said Lake.
The Fed meets every six weeks, they’ll meet next in September. Many experts are predicting a rate cut after that meeting.