Firms in the United States believe that the Federal Reserve’s interest rate hike is a bad business strategy with disastrous long-term consequences.
The Federal Reserve will officially start reducing its $9 billion balance sheet anytime this week as fears of an economic slowdown rise. Wall Street remains vulnerable to global political and economic trends, having posted its longest losing streak in a decade.
According to the Wall Street index, the S & P 500 was down 0.25% at 4:00 PM New York time, the Nasdaq composite was down 0.13%, and the Dow Jones industrial average was down 0.12%.
As for the subject of the east European war, Russian forces had entered the center of Ukraine to take control of one of the country’s most industrial cities, Sievierodonetsk. The Russian war has caused a significant increase in commodity and energy markets, putting the global supply chain at risk.
The EU and the US tried to ban Russia from becoming an OPEC member, yet their efforts were a failure for them. The global market is still struggling. The world banks reported declines in the fourth quarter.
In the U.S, the local banks were down by an average of 2-3%, including JPMorgan Chase & Co, which fell by 2% according to its reports. Financially speaking, other local banks fell dramatically by 3%. That includes regional banks such as SIVB and SIT banks.
Nonetheless, despite the negative news and the significant increase in the US 10-year treasury yield to 2%, tech stocks are regaining ground. Amazon, Alphabet, and Meta have led the Nasdaq composite gains over the last three days. Early this week, U.S firms confirmed in a conducted survey that the Federal Reserve’s tightening policy had an enormous effect on their productivity.
As all marketers are aware, tech stocks are becoming less appealing as a result of the impending global supply chain and chip shortage.
Experts believe that a recession is coming, and the U.S. economy won’t be able to dodge this heat now. As for the biggest challenge for the U.S manufacturing industry, the labor market is still on top of the concerns. Despite the small improvement in the labor sector, some sectors still suffer from a sharp shortage of workers. Factories and multiple companies reported that their ability to keep up with consumer demands declined. The demand ramifications, the work productivity declines, and the high costs.
As for consumer sentiments, a large proportion of American buyers feel the country’s low ability to deal with inflation. Now the FED will reduce its $9 billion balance sheet and increase its interest rates by 50p by the next meeting. It is also expected that by the end of the next two meetings, the total increased interest rates will be 100 bp.
The Federal Reserve has already lifted its interest rates in the past two meetings by a total of 75bp.
In the long term, higher interest rates mean a housing market recession because it will affect mortgage rates and cause a hot housing market. The tightening policy will also affect tech stocks and the retail market, which may cause higher migration from tech stocks until things cool down a bit.
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