US stock market ‘suffering from a hangover’ and stocks will continue to fall
Despite the seeming universality of the problems that both the US economy and the stock market face: the threat of a recession against the backdrop of record high inflation, the problems they face are of a completely different nature.
As for the US economy, the country is experiencing a severe bout of inflation caused by the pandemic; pent-up demand faced a massive shortage of everything from workers to gadgets. Inflation eats up economic growth by raising prices and canceling out wage increases. But some of the conditions associated with the pandemic, such as the disruption to supply chains, are already normalizing. And there is a chance that the economy will still be able to solve the problems of the last 2 years without falling into a full-blown recession.
Turbulence in the stock market is different in nature. The market is going through a brutal correction that has been taking shape for more than 10 years, and its fall from the ultra-high level looks quite natural. Sooner or later, the “bubble” that formed in the market had to burst as the interest rate rose. And the only factor that remained unknown was how strong the recession would be. Now inflation hitting the economy has prompted the Federal Reserve to raise interest rates faster than Wall Street anticipated. That is why the market is experiencing an unprecedented drop, the bottom of which is still not there.
At the same time, it does not matter at all whether this recession is such from a technical point of view or from an actual one, since – and this is recognized by everyone – a “bear” market has come.