Wall Street has experienced a rollercoaster week, with stocks bouncing between highs and lows.
If inflation continues to run hot and the Fed raises rates in response, the stock market will decline further—potentially significantly so—with growth stocks, especially unprofitable ones, getting punished the most.
When interest rates rise, the cost of money increases, which makes money more expensive to lend and borrow.
When interest rates decline, the cost of money decreases, which makes money cheaper to lend and borrow, and motivates people into “higher risk” assets like growth stocks to find good returns.
That being said, everyone should have concerns about their retirement savings because the stock market is, historically speaking, significantly elevated and inflation is running hot.
If you’re nearing retirement, you should think hard about how the market is currently situated and your individual positioning to determine if it makes sense to remain invested.
This is helping to continue driving home prices upwards, but we could see moderation in the coming months and years, depending on Fed policy actions.
Of all the sectors that do well in an inflationary environment, few have performed better than energy, but it’s not a blanket investment as there are various risks here as well.
After enjoying the asset price jump, we’re now witnessing the negative side of this capital injection.