The financial markets are getting the message from the Fed, company guidance and inflation that the United States and world economies will be slowing. The recent fiscal quarter shows growth is shrinking while inflation continues to rise – we call that stagflation. If another quarter shows the same, we’ll officially be in a recession … although at this time most economists aren’t forecasting that this year, but in 2023. Unlike a normal recession when investors can hunker down, sell a few assets and plan for a rebound, this time the devalued dollar is likely to cause consternation as to what they should do.
As the Fed finally starts to deal with inflation, the market took note this month and seems to be selling off across the board. The expectation is that the economy will slow and as they say in the investing world, “don’t fight the Fed.” There isn’t a silver bullet that can keep businesses booming, paychecks rising and inflation under control forever. Something needs to give, especially when our government continues to expand, spend and add to deficit spending and debt.