The wild moves in the broad market index come as the U.S. deals with inflationary pressures it has not seen in decades — exacerbated largely by the start of the war in Ukraine which contributed to a surge in energy prices.
On top of that, a more aggressive monetary policy stance by the Federal Reserve has raised more concerns over the economy tipping into a recession. The central bank hiked rates by half a percentage point earlier this month. This week, Chair Jerome Powell reiterated his comments that he will not hesitate raising rates to tamp down inflation.
Rising rates first hit highly-valued tech stocks, but the selling has spread to other parts of the market. Retailers especially suffered this week after poor quarterly results from Target and Walmart cast doubt on the companies' abilities to deal with rising costs. Meanwhile, energy is the only positive S&P 500 sector for the year.
“At some point the market will turn, but it won’t be until these winds are shifting, inflation is coming down and consumers are feeling good about spending money again like they want to and are used to. These are pretty long cycles,” said Johan Grahn, head of ETF strategy at Allianz Investment Management.
