Monday, March 1, 2021

Why U.S. Stocks Are Selling Off, And Is This An Opportunity?

 The U.S. stock market has seen several whipsaws over the past two weeks, as traders are largely concerned about the rise in inflation.

Forbes

 The general qualm is that strong inflation and on-going support from stimulus relief packages will trigger the Fed's immature action— a rise in interest rates. Stock traders and investors believe this could derail the U.S. economic recovery. 

Stock traders are primarily concerned that inflation is picking up steam and getting out of control. Therefore, to bring the situation under control, the Fed will have no choice but to increase interest rates.

Generally speaking, inflation and interest have a negative correlation, and the Fed uses the interest rate to lower inflation. Another tool that can also influence inflation is the bond purchase program—traditionally known as the quantitative easing program. 

No comments:

Post a Comment