What a brutal way to end the week in the stock market, with the Dow Jones dropping a whopping 880 points. The majority of stocks were hit hard by this drop. Moreover, the inflation report was out this week and showed we had hit 8.6%, which is nearly a 40-year high for the US. Stocks are being beaten up, and costs are soaring. If that wasn’t enough, AAA posted the national average for gas at over $5.00 for the first time, setting a new record.
It’s clear that the economy is struggling, and the Federal Reserve has a very tough job ahead of them to reel in inflation and stabilize the overall economy. As I’ve mentioned before, I think it’s very likely we will see an interest rate hike by the end of the summer. At this point, I would expect a 0.5% increase by August. Sadly, interest rates won’t be the only increase this summer as many stores plan to raise costs to keep up with their rising expenses. This means that families can expect to pay more for food, gas, and other everyday expenses. With all these variables affecting the economy, recession fears continue to rise. The Fed must take action to curb rising inflation, but too drastic of measures can push the economy into a recession. Some analysts suggest it may be a short recession or at least different from what we saw around 2009. Either way, people need to be prepared for higher costs in the near term, especially at the gas pump.
Putting all the doom and gloom to the side, we saw Amazon’s (AMZN) stock split take effect on Monday, opening at around $122 per share. This price point is much more manageable for anyone interested in Amazon who doesn’t want to purchase one share for $2,000. Additionally, Tesla (TSLA) announced on Friday that they’ve filed for a three-to-one stock split, which makes Tesla just one of the many larger companies looking to capitalize on stock splits. While Tesla stock has taken a hit, currently trading around $700 per share compared to April when it was near $1,145 per share, Tesla car orders are through the roof. Elon Musk has stated recently that the manufacturer may pause taking orders as the wait time for delivery is nearing a year out.
As kids finish school and we move into summer, we’ll see how everyday costs fare and the effect on families throughout the country.