Wall Street’s massive sell-off on Friday plunged the Dow into a bear market as investors appeared resigned to the fact that the Fed has abandoned hopes for a “soft landing” and will continue to aggressively raise interest rates to fight inflation – even if it means more hikes. in. recession.

The Dow Jones Industrial Average was down more than 700 points, while the S&P 500 was down nearly 100, down 2.65% from its pre-market starting point.

The tech-dominated Nasdaq Composite fell more than 300 points, or 2.75%.

The Dow is now down 20% from its all-time high — which would officially put it in bear market territory.

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

The market was shaken by the Fed’s recent 75 basis point hike as well as the sharp fall of the British pound against the US dollar.

Britain’s new prime minister, Liz Truss, spooked global investors on Friday when her Chancellor of the Exchequer, Kwasi Kwarteng, announced that the government would pursue tax cuts and more borrowing in a bid to lift the UK economy out of its doldrums.

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

The announcement sent stocks, bonds and the British pound tumbling — fueling fears of a global recession.

“The market is finally taking the Fed’s word for it – they’re going to cause a recession to fight inflation,” Chris Zaccarelli, chief investment officer for Charlotte, NC-based Alliance of Independent Advisors, told The Post.

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

Financial markets were spooked by the Fed
Financial markets were spooked by the Fed’s strategy of aggressively raising interest rates to beat inflation.

Zaccarelli said “things will get worse before they get better, but in the end they will get better.”

“Unfortunately, it will take some time before things get better.”

Investors should be prepared for a bumpy ride, said McMillan.

“The Fed has committed to raising rates until inflation is under control, which is triggering a fresh cut this time and is reason for caution,” McMillan said. “We can expect continued market turbulence for some time.”

McMillan said the Fed is relying on a proven formula – short-term pain followed by long-term gains.

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

“This is a healing process and one that sets the stage for a healthier economy and market.”

Leave a Reply