Yesterday, the Dow Jones and Nasdaq indexes fell sharply, sparking selling frenzy around the world and leaving Americans asking the dreaded question: is the United States heading for a recession?
Carol Ross, returning investment banker and author of “You Will Own Nothing,” joins Jill Savage on the “Blaze News Tonight” panel to shed some light on the situation.
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According to Ross, the stocks commonly referred to as the “Magnificent Seven” — Apple, Microsoft, Google-parent Alphabet, Amazon, Nvidia, META and Tesla — “have driven the stock market over the last few years and have become incredibly valuable, at least on paper.”
“I think investors have realized over the last few weeks that stocks have become a bit overheated. [and] “Companies realized they were going to have to actually spend a lot of money to make the AI dream a reality,” Roth says, “so that started to back away.”
The “pullback” Ross referred to then “accelerated last Wednesday when Federal Reserve Chairman Jerome Powell said the Fed was not planning a rate cut at the meeting, but that a September rate cut remained on the agenda.”
“Then on Friday, we got a really bad jobs report that sparked some recessionary signals,” she explains, adding, “The economy wasn’t as strong as the Fed had projected, and there were concerns that the Fed was delaying cutting interest rates.”
“We’ve already seen trillions of dollars wiped off the stock market because of this, and over the weekend we saw things get worse in the Middle East and Japan is in trouble,” Ross told Jill.
“The opposite situation is happening in Japan. They had negative or zero interest rates for about 17 years and finally decided to normalize about four months ago,” says Ross. “On Wednesday this week they decided to raise interest rates, which caused some issues and a stronger yen, which resulted in a lot of trading unwinding, which then created a contagion that rippled into the U.S. market.”
“Fortunately, our infections, although we haven’t had good days, haven’t been too bad. [as Japan]The good news is that this is a real breather for the market.”
“The Nasdaq is up about 29% over the last 52 weeks and the S&P 500 is up about 26%. It’s a terrible day and we need to get a full picture of what’s going on, but we can still take some comfort in knowing we only lost a few percentage points in terms of the spread.”
“It’s strange that millions of people were unable to trade at all this morning… is this normalizing? What is going on?” asked Matthew Peterson, editor-in-chief of Blaze Media.
Watch the episode above to find out Ross’s answer.
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