bell of the new york stock exchange yet. There's not
much to clap about these days. Breaking news on Wall
Street and yeah, it's pretty bad. The market's tankin
today. The dow on pace for its biggest loss in two
years. It was not a good end of the week on Wall Street
volatility has ruled the markets. So what's happening,
Just look at the headlines, major events like th
pandemic, the war in Ukraine and supply chain issues
have all led to inflation. A lot of the situation that
we're in right now was created by all the money coming
into the economy, whether it was the cares act,
unemployment insurance benefits or the direct payments
to individuals and families inflation hit its highest
level in 40 years, prices of essentially everythin
have jumped and when big companies like target
announced they're feeling the effects of inflation.
Wall Street doesn't like it. I did not project the kind
of significant increases we would see in freight and
transportation costs all time, record fuel and diesel
costs Right now. We project that's going to hit us
about a billion dollars of incremental costs in this
fiscal year. This is what happened when the pandemic
hit in 2020 investor panic, triggered by economic
uncertainty led to the collapse of stock prices. On
March 16 alone, all three indices dropped by at least
12%, But it didn't compare to the stock market crash of
1929, Millions of people invested their savings or
borrowed money to buy stocks and on October 29, also
known as Black Tuesday, investors traded more than 16
million shares on the New York Stock Exchange in one
day. This was brought on by a few factors, americans
taking out more loans and ultimately going into debt,
an increase in interest rates by the Fed and a mild
recession a few months before the crash, all which
created panic among investors. The sharp decline on
Wall Street contributed to the Great Depression in the
1930s. It also happened in September of 2008 in the
middle of the Great Recession, widespread job losse
and Congress's failure to pass bank bailout on time led
the dow to drop 777 points too many people took out
loans they couldn't afford, especially for homes. This
drove up housing prices to levels that many found
unaffordable. All of that debt resulted in a series of
government bailouts and spurred financial instability.
The aftermath of the crash wiped out many americans
retirement savings and impacted the economy for years.
Typically, stock market and economic performance are
aligned when the stock market is performing well. It
usually reflects a growing economy, but today the only
thing surging are investors frustration and the market
doesn't like this inflation. Wh does it in the market
like inflation Because that means that that has to
raise interest rates because too much inflation creates
a very volatile economy and the Fed has hinted that
another rate rise could be coming. The thought is, if
you raise interest rates, the cost of borrowing money
will become more expensive and therefore demand will go
down. Hopefully prices will go down with it. The state
of the stock market can be defined by two animals. A
bear market is when stock prices fall, typically 20% or
more from its recent highs, that's because bearers w
hibernate represent a market in retreat. Bulls on the
other hand, charge forward. So when the economy is
surging, it's a bull market, there's a lot of concern
about whether or not this is a temporary burst of price
increases, like we often see coming out of our session
or whether it's the beginning of a more sustained
pattern of higher prices and frankly it's going to be
months before we really have a sense of that answer.
But some say the U.S. Labor markets are strong and
represent a good sign for the economy domestically.
There are two jobs open for everyone looking and
stimulus money combined with pandemic era saving means
many families have money saved up. Household balance
sheets are very strong along with the bad news. There's
also quite a bit of good news out there and that's why
I'm not confident That 100% there's going to be a
recession but the country's financial leaders
acknowledge navigating to a stable exit from our
current turmoil will be difficult. I'm not doom and
gloom but I think we're in a period of time where we
haven't seen it in a number of years tackling inflat
and fighting off a recession will likely mean more
financial headaches and maybe a few lows before the
market roller coaster bottoms out and starts to climb
back up again. Bianca Foschini, Newsy Our first guest