Crash Imminent? How Inflation and Interest Rates Are Impacting Stocks
Crash Warnings: What Happened on December 18?
December 18 proved a bloody day for the stock market as approximately $1.5 trillion was wiped from its value. Prominent indices like the small-cap Russell 2,000 and the large-cap S&P 500 erased their post-election gains, with the S&P 500 falling to 5,872.16 points.
Cryptocurrency Market Decline
The cryptocurrency market also saw turmoil, erasing some $300 billion before reducing losses to about $100 billion. Bitcoin experienced a turbulent swing from just under $105,000 to approximately $98,000.
What’s Behind the Stock Market Crash?
The downturn traces back to the recent Federal Open Market Committee (FOMC) meeting. Despite announcing a 25 basis points cut in interest rates, the Fed warned of fewer cuts anticipated in 2025 and revised its inflation outlook upward, from 2.1% to 2.5%.
- Investors view this as a sign the Fed's strategy may not be working.
- Concerns about a potential inflation crisis are growing.
- Previous recession fears did not materialize, but inflation is becoming an issue.
If trends continue, we could face a forthcoming inflation crisis with predictions of double-digit inflation in the coming years.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.