The benchmark S&P 500 index has fallen into a bear market for the first time in more than two years. A bear market is when indices like the S&P 500 sink 20% or more from their most recent all-time high.
Why are stocks in a bear market?
Investors are grappling with multiple headwinds: Rising interest rates, soaring prices, the war in Ukraine, and fears of a possible global recession. These factors have damaged investor confidence, causing many to exit their investments.
Recently, the stock market sell-off was exacerbated by higher-than-expected inflation in the US, and the Federal Reserve’s move to raise interest rates by 0.75%. The Fed also indicated that more aggressive rate hikes could be possible this year to combat inflation.
Investors are understandably anxious. Higher interest rates can tame inflation, but if the Fed raises rates too much, the economy could slow to the point of a recession....