The Dow (stock market) plunged in a free fall of almost 1600 points on Monday. What happened?
Well it turns out that many are concerned that our economy is going too well and are afraid of inflation. Per CNN, “And the rout in U.S. markets continued to ripple around the globe. Japan’s Nikkei index plunged 4% in Tuesday morning trading while the S&P/ASX 200 in Australia dropped 3%.
The White House said in a statement that President Trump was focused on “our long-term economic fundamentals, which remain exceptionally strong.” The statement cited strengthening economic growth, low unemployment and increasing wages for workers.” What is happening is the beginning of a possible panic by investors who have been lulled into thinking that inflation could not be really happening.
If you look at the grocery shelves in your local supermarket you might have noticed that prices have started to slowly creep up and at gas stations across the country the price at the pump has risen dramatically for the past several weeks. Yes that is inflation showing it unwanted head and this could just be the beginning.
“If the economy gets much stronger, it could touch off inflation, which has been mysteriously missing for the nine years of the post-crisis recovery. That could force the Federal Reserve to raise interest rates faster than planned.
“People are dealing with the shock of seeing real inflation for the first time in a while,” said Bruce McCain, chief investment strategist at Key Private Bank.””
So for almost a decade we have not had any inflation to speak of. We now could suffer a catastrophic failure of the stock market which would ripple throughout the economy of not just the United States, but the overseas markets as well. Could we see a collapse like the stock market crash of 1929? I for one do not think so with all the safety checks that have been built into the monetary system since the Great Depression.
Does this mean that you should not worry? No, it should be a warning to you to be alert to fast changes to the stock market system. Any more free falls like yesterday and today could cause panic on the part of investors. Hopefully the Fed will be monitoring what is happening closely and take quick action to blunt any action that might further cause the market to drop.
In conclusion you should not panic yourself, but you most certainly be prepared to ride out any backlash from any inflationary moves that the Fed might take.
That is my opinion- Jumpin Jersey Mike