![]() That decrease in demand may eventually cause prices of housing, autos, and high-ticket items to recede, but those higher rates will do very little to lower the cost of gasoline, bread, milk, and eggs. Higher interest rates will certainly make mortgages, rent, auto loan payments, and credit payments more costly, causing pain and eventually less demand. That tool, however, is blunt and may not be able to contain the inflation on those basic necessities. ![]() The Fed, whose principal inflation fighting tool is rate hikes, is aggressively fighting inflation. It is easy to put off purchasing a TV whose price has jumped, but not so much that package of chicken to feed your family. This type of inflation is somewhat unique in that paying higher prices is almost unavoidable. The biggest gains have come from basic necessities such as food and energy. Prices of nearly everything have risen, wreaking havoc on monthly budgets. What caused the sharp selling and what does it mean for stock investors going forward?Ĭonsumers have been on edge. Yesterday’s selloff leaves the S&P500 in bear market territory, a label given to an index when it closes -20% or more below its recent high. The S&P500 lost in all but 2 months year to date with March turning in a +3.58% gain and May registering a scant +0.01% increase. In fact, this whole year has been a tough one for stocks. Historical monthly returns show that June is the 3 rd worst performing month of the year, and as you probably know by now, this June is falling in line with history as a tough one. Unfortunately, June is not the stock market’s favorite month. Here in the Northeast, the weather is warm but not too hot, kids and grandkids begin their summer holidays, the summer solstice arrives, we have Father’s Day, and yes, I celebrate my birthday. There is something I like about the month of June. A sharp drop in crypto assets put further pressure on riskier stocks. Stocks fell in a powerful selloff yesterday as Friday’s hot inflation number continued to instill fear in traders.
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