For years, the US economy has been booming. But now, it’s starting to look like that party might be coming to an end.
The reason? The Federal Reserve has been tightening monetary policy, and asset prices are plunging as a result.
Stocks Have Plunged $12 Trillion Since January
The first casualty of the Fed’s policy change has been the stock market. As measured by the Wilshire 5000 all-cap index, stocks have shed $12 trillion of market capitalisation since January. That’s a loss of nearly 30% from the peak. And it shows no signs of stopping any time soon.
Bonds Have Lost 14% of Their Value
Bonds have also taken a beating. Over the past year, bonds have lost 14% of their value, wiping out $7 trillion in market capitalisation. And with interest rates rising, there’s no end in sight for this sell-off either.
Cryptocurrencies Have Vanished $2 Trillion in Market Cap
Cryptocurrencies have been hit particularly hard. After surging to record highs last year, crypto prices have slumped back down to Earth. In the past year, cryptocurrency prices have fallen by more than 50%. That’s wiped out $2 trillion in market capitalisation. And there’s no telling how far prices could fall if the sell-off continues.
House Prices Are Falling Too
Finally, even house prices are starting to come down. They don’t adjust as quickly as other asset prices, but they’re still falling. Mortgage rates have risen to 7%, up from 3% last year. That’s making it harder for buyers to afford homes. As a result, prices are starting to come down.
The US economy has been booming for years now. But that party might be coming to an end—and the reason is the Federal Reserve. By tightening monetary policy, the Fed has sent asset prices plunging and set off a chain reaction that could eventually lead to a recession. So what does this mean for you? Here’s what you need to know…
