Numerous sour notes of poor economic news sent the Dow Jones, S&P 500, and Nasdaq plunging downhill within the first hour and a half.
The Dow dropped 2.5%, S&P 500 fell over 3.5% and the Nasdaq plunged nearly 4% as word of higher-than-expected inflation and lower-than-expected economic growth created a bloodbath on the trading floor. In addition, global markets nose-dived as investors dumped government bonds, oil prices slipped and cryptocurrency crashed.
In the U.S., the runaway inflation train has everyone’s attention as it hit 8.6% in May, creating a new four-decade highwater mark. Although wages have increased during the last two years, with inflation edging upward by the week, real wages are dropping by 3%.
The other noticeable issue, gasoline shattered another all-time-high price per gallon – $5 per gallon on a national average, according to AAA.
Economists have their eyes on the Federal Reserve as it considers what to do next. After a .25% rise in March and a .50% in May, a .75% hike could be on the table.
Polls show that Americans are worried about continuously rising costs. For example, Harvard conducted a survey last month that said 95% of respondents said inflation is “very serious” or “somewhat serious.” Forty-seven percent said that the Biden administration is responsible.
However, the president attributes inflation, gas prices, supply chain gridlock, food prices, and supplies to Russia’s president, Vladimir Putin, calling it “Putin’s price hike.” As the United States and other leading economies continued to face economic headwinds, the World Bank cut its 2022 global growth forecasts from 4.1% to 2.9% and warned of the “sharpest slowdown in 80 years.”
“Global inflation is expected to moderate next year, but it will likely remain above inflation targets in many economies,” the World Bank said. “If inflation remains elevated, a repeat of the resolution of the earlier stagflation episode could translate into a sharp global downturn along with financial crises in some emerging market and developing economies.”