The holiday season is usually a time for good cheer, but markets aren't getting into the spirit today as stocks continue to fall after yesterday's sell-off. Investors have been increasingly concerned about the future path of interest rate hikes from the Federal Reserve while we're in what's called a "blackout period" of silence from Fed officials on their plans.
Without much guidance from policymakers, investors are being left to their own thoughts about the potential for a jumbo-sized rate hike of 75 basis points, and the possibility (eventually) of a recession.
With nearly 80% odds, markets still overwhelmingly believe that a rate hike of 50 basis points is coming during the Fed policy meeting next week, but questions still remain about how long that will last. Even with a smaller rise in interest rates, you can still expect mortgage rates to go up, as well as any credit card debt you might have to become more expensive. Mortgage rates have recently declined, with the average rate on a 30-year fixed-rate loan dropping to 6.49% from 7.08% a month ago, according to data from Freddie Mac. But that's not a trend that is likely to last once another interest rate hike comes through.
Fresh inflation figures will also be released next week, just ahead of the central bank's meeting, which will indicate how much the Fed's fight has had an effect on rising prices. If inflation remains high, brace yourself for the market response.
While your investment portfolios might have been getting bruised lately, there is still a potential for a rise in markets right around Christmas, or what's known as a "Santa Claus rally." There is no precise reason as to why stocks sometimes pop in the period between Christmas and the beginning of the new year. But, for many of us, it would be a welcome surprise after we've seen markets tumble 17% so far this year.
- Kristin
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