(KRON) — Most stocks on Wall Street continued to fall on Tuesday due, in large part, to an upcoming move by the federal reserve and an increasing rise in consumer prices.
“The stock market to a point hates inflation nor beyond a certain point, hates inflation. It means that incomes are being squeezed. We can all feel that now with fuel prices rising, food prices rising, and it also puts the federal reserve on guard and prepared to and in fact, beginning to raise interest rates,” said Gary Schlossberg, from the Wells Fargo Investment Institute.
The federal reserve is expecting to announce a 3.4-point hike on Wednesday in hopes of cooling off inflation and rebalancing supply with demand. However, there is also fear the federal reserve’s attempt to cool inflation will slow the economy too much.
“We do think that growth will be slowing during the balance of the year and the economy will be very vulnerable to a recession around the turn of the year as well,” said Schlossberg.
In the short term, none of that is good for the stock market or for individual investors, some of whom have seen their 401k retirement accounts drop as much as 20 percent since the start of the year.
“Don’t panic. Understand that what’s occurring now is temporary in nature. Declines are temporary, and growth is long term,” said Kevin Gahagan, from Wealthspire Advisors.
Financial planners and investment managers say history shows us the stock market will recover typically in two to three years time, meaning most with a diversified portfolio should stay the course and not do any panic selling or repositioning of investments until that recovery begins.
That advice is likely good for those who have retirement around the corner.
“Let’s just say my retirement date is a year out or 24 months. As difficult as it will be, odds are your portfolio will be in better shape 12 or 24 months from now than it is today,” says Gahagan.