Financial experts across the world are pointing fingers at the US Federal Reserve for a slow response to rising inflation. Financial markets are being weighed down by losses. There is no relief in sight.
The tech-heavy Nasdaq fell another 2% on May 24, while Snap – a popular social media platform – lost 43.1% of its market cap on May 23. Snap’s slowing growth hurt the tech-heavy index. Reports show that Nasdaq’s losses came after the social media company sounded an alarm. This dinged social media stocks of Meta, formerly known as Facebook, microblogging platform Twitter and Alphabet – Google’s parent company.
Stephanie Link, the chief investment strategist, and portfolio manager at Hightower, says this shows how much technology and comm services are still over-owned. They are the ones that are getting hit the hardest. Link believes that Snap’s fall came as a big surprise for everyone. She said it’s “really challenging times”. The expert says the choppy environment will continue for at least a year because of so many unknowns.
Alex Kruger, an economist, said the US Federal Reserve will not stop tightening unless markets break or there’s a considerable drop in inflation. The Fed has yet to outline what inflation would need to look like is one of the main issues affecting traders. It just reiterates that its goal is to see clear and convincing evidence that inflation is coming down towards its 2% target. Kruger says the Fed needs to see year-on-year inflation drop 0.25% – 0.33% on average every month until September in order to bring down inflation to the 4.3% – 3.7% range by the end of the year.
The economist warned about the possibility that the Fed could initiate more hikes and begin exploring the sale of mortgage-backed securities as part of a quantitative tightening campaign. He said the markets would shift to a new equilibrium and dump hard.