Your Guide to Why the Stock Market Has Turned Into a Horror Movie
Over the last few weeks, following the financial markets has felt a bit like watching the prom scene from Carrie—the party’s over, there’s blood all over the floor, and flames appear to be eating the building while the whole crowd runs screaming for the exits.
Am I being hyperbolic here? Maybe a little? The point is that, despite a rally on Friday, everybody’s portfolio has been getting killed. After a bubbly two-year run that gave us meme stonks, Matt Damon shilling crypto, $2 million monkey JPEGs, woozy tech valuations, and so much more as retail investing once again became a national pastime, stock prices finally seem to have popped while Bitcoin and other digital currencies are now in a total freefall. We’ve entered the era of crash memes.
There are interesting, sometimes complicated stories about why individual stocks and various blockchain schemes have gone sideways. But the main explanation for why your 401(k) has started to look like the aftermath of a Brian De Palma film is pretty straightforward: The Federal Reserve did it. The U.S.’s central bank is raising interest rates in order to fight inflation and has in the process sent tremors all throughout the markets. That’s partly because rising rates have a direct impact on how stocks and other assets are valued, but also because many investors are worried the Fed might tighten credit so much that it triggers a recession. In other words, stocks are falling thanks to both math and fear.
