Last week the Fed raised interest rates by half a point to combat inflation and it’s possible more are coming if inflation continues on its course. It was their biggest hike in 22 years. Their goal is to cool the job market which they believe is key to controlling inflation. Wages have accelerated due to the shallow supply or workers. The job market isn’t hot, it’s too hot. Last Friday’s job report proved that, 428,000 jobs were added. It was the 16th straight month of job gains and the 12th straight month of job gains over 400,000. The unemployment rate remained at 3.6% and only 1.38 million Americans are collecting traditional unemployment benefits, this is the fewest since 1970.
By raising rates, it will cool the economy and probably lead to a recession. Why could this straw break the camel’s back? It’s likely Europe is in recession due to the Russian invasion and China’s COVID lockdown is surely slowing their economy and straining the world’s supply chain.
There are a million scenarios of things that could happen but history has proven getting out of the market during a recession is the wrong move. Moving to safety is a better decision. Just remember February 2020, the market was rocked losing 30% over COVID fears but just one month later it bottomed and skyrocketed.
