A wave of massive selling driven by investor fears that the global economy could slide into recessionaround the world on Friday.
The Dow Jones Industrial Average, S&P 500 and 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% from its January peak.
As Michael George reports for “CBS Saturday Morning,” interest rate hikes aimed at reducing inflation have a ripple effect on the economy. On Friday at the New York Stock Exchange, the chairman of a company called Sustainable Development Equity celebrated the close of what was a terrible day of declines of 486 points, preceded by a terrible week.
The market has lost over 5,000 points in 12 months, with over 1,000 points lost this week. And there are more storm clouds to come, according to UC Berkeley economist James Wilcox.
“It’s very likely that we’re going to have a recession, and the likelihood of that happening has really increased all year, and especially since the summer with the Fed being so aggressive about raising interest rates” , did he declare.
The Federal Reserve’s trio of interest rate hikes in 2022 has made borrowing harder for businesses looking to expand and for consumers, especially those hoping to own a home. Average 30-year fixed mortgage interest rates have risen from 3.3% to 6.7% over the past nine months on the back of hikes by the Federal Reserve board.
“It’s extremely difficult to know how much further mortgage interest rates could go up, but I think we could still see other interest rates, auto rates, credit card interest rates , increase, and it will make it harder for people to buy new cars or buy more expensive cars,” Wilcox said.
In all of this, White House press secretary Karine Jean-Pierre addressed the economy on Friday.
“That’s why we passed, that’s why Democrats in Congress passed the Cut Inflation Act. By the way, no Republicans supported that,” she said.
The White House is also pointing the finger at gasoline prices, which have fallen considerably in recent months, and a part of the economy that remains solid: the labor market. Unemployment is 3.7%.