October 5, 2022
Dow fell in bear market amid fears of deep recession

The Dow was buoyed by a bear market in a massive sell-off on Wall Street on Friday as investors resigned to the fact that the Fed has given up hope of a “soft landing” and is aggressively fighting inflation. will continue to raise interest rates – even if it means a deep recession.

The Dow Jones Industrial Average was down more than 800 points – before falling into bear market territory at one point – after a late rally compounded losses. The index closed 486.27 down at 29,590.41, its lowest level since 2022 and a decline of over 20% that defines a bear market.

The S&P 500 dropped 65 points, down 1.7% from its pre-market starting point. The tech-dominated Nasdaq Composite fell nearly 300 points, or 1.8%.

“The current numbers are certainly scary,” Brad McMillan, chief investment officer at the Waltham, Mass.-based Commonwealth Financial Network, told The Post. “And really, there’s a lot to worry about.”

Markets were rattled by the Fed’s recent 75-basis-point hike as well as the British pound’s sharp fall against the US dollar.

The United Kingdom’s new prime minister, Liz Truss, stunned global investors on Friday when her Chancellor of the Exchequer Quasi Quarteng announced that the government would seek tax cuts and more borrowing in an effort to lift the British economy out of its crisis. Will do

The S&P 500 fell more than 2.5% on Friday.
The S&P 500 fell 1.7% on Friday.
Getty Images/iStockPhoto

The announcement sent stocks, bonds and the British pound to falter – fueling fears of a global recession.

“The market is finally taking the Fed at its word — they are going to cause a recession to fight inflation,” Chris Zacarelli, chief investment officer at Charlotte, NC-based Independent Advisors Coalition, told The Post.

“This is bad news for financial markets and bad news for workers and the economy.”

Financial markets were stunned by the Fed's aggressively raising interest rates to beat inflation.
Financial markets were stunned by the Fed’s aggressively raising interest rates to beat inflation.
AP

“Things will get worse before they get better, but they will eventually get better,” Zaccarelli said.

“Unfortunately, it’s going to take time for things to improve.”

McMillan said investors should be prepared for a bumpy ride.

“The Fed has committed to raising rates until inflation is brought under control, which is a reason for the current renewed slowdown and a reason for caution,” McMillan said. “We can expect the market volatility to continue for some time.”

McMillan said the Fed is relying on a tried-and-tested formula — short-term pain followed by long-term gains.

“The Fed is doing surgery on the economy right now,” he said. “In the short term, it’s painful. But in the long run?”

“It is a healing process and sets the stage for a healthier economy and markets.”

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