The selective S&P 500 of Wall Street has entered a downward trend this Friday, dragged by the fear among investors that the plans to reduce inflation – the highest in four decades – in the United States by the Federal Reserve will fail. In financial terms, assets are said to be in a bear market when their values fall 20% or more from a recent peak. The S&P 500 has fallen 2% on the day, standing 20% below the historical maximum that marked the close of last January 3. If the day ended in this situation, the selective would officially enter a downward trend for the first time since the collapse that Wall Street experienced in 2020 with the outbreak of the covid-19 pandemic.
The Fed’s unprecedented efforts to boost the economy during the health crisis helped the benchmark stock index climb strongly through the end of last year. Now, with central bankers reining in stimulus as inflation rises, stocks are being sold off by investors convinced a recession is all but inevitable.
The decline is being led by consumer stocks, with the sector down 35% from the S&P 500’s January high. Communications services and information technology are also among the biggest decliners. The only S&P 500 sector to gain this year is energy, which is up 40% since the index peaked.
The president of the Federal Reserve (Fed), Jerome Powell, has reiterated this week his determination to reduce inflation and has stated that he will support interest rate increases until prices begin to fall to a “healthy level”. Earlier this month, the Fed raised benchmark lending rates by half a percentage point, the second hike of 2022, to try to stem inflation hovering at 40-year highs.
Since 1929, the S&P 500 has entered a downtrend 17 times, including this Friday, according to data from CFRA Research. The longest period in history lasted 998 days, from September 1929 to June 1932, during the Great Depression. More recently, the longest phase was 929 days, from March 2000 to October 2002. By contrast, the shortest was just 33 days, from February 19, 2020, to March 23, 2020, when the The coronavirus pandemic began to spread from China to the rest of the world.
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