Stock Market Crash News
We weren’t going to write news about the recent stock market crash but events today may have change commentators’ perception of what is really going on in the world economies.
This may be slightly old new but most commentators had previously agreed that the US is currently in a recession although no one currently really knows how deep the recession might be because you only get the data *after* the event has occurred.
The Fed cut interest rates by 0.75% today before their normal monthly meeting which is the first time this has happened for many years. It’s also a drastic cut which could lead to inflationary pressures in the future. It has also been reported that over 50% of US home owner mortgages are now re-mortgagable so people are asking “was the rate cut really required” ?
At first markets rallied after the rate cut. And the markets rallied hard in the US and Europe. At the close the London FTSE stock market ended up much higher by 161 points although it fell the previous day by over 5% of its value.
However, the markets which this cut should have stirred into moving higher actually remained much lower. The Dow Jones Industrial Average ended another 133 points lower and the Nasdaq and S&P also ended lower.
So what might happen next?
The US economy is the most important economy in the world and must continue to grow even at low rates. The Fed and others are worried that consumer spending has slowed too much and the economy will falter and move into a full recession.
Although this rate cut seems extreme, this may be the boost that consumers need as they make up over 75% of spend in the economy and need renewed confidence after the recent credit crunch and increases in home repossessions. However, there could be inflationary pressures if the economy starts to stir and grows too fast.
In the UK rate cuts may not appear initially because inflation has already started to creep up due to increases in fuel and utility prices amongst others. Although this is old news it will still need to be taken care of.
In the UK, inflation is the sole responsibility of the Bank of England and the only tool they have to control this is interest rates which is a tall order for any professional.
These are interesting times for all global economies and their respective governments so let’s see what they do next. Stock markets are likely to be extremely volitile in the next few months and another crash has not been ruled out.
