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A Quick Guide to Why the Stock Market Is a Giant Mudslide Right Now

Say Contributor

The stock market took a big hit today, increasing fears that the long-dreaded recession might finally be on its way. Big Drop The Dow Jones Industrial Average dropped 800 points today, the biggest stock market loss of the year so far. Analysts say that the increasing trade war between America and China has taken a toll on the worldwide economy, and we are now starting to see the fallout, as countries like Germany have been hit hard by the tariffs on exports and the effects it has on manufacturing. Bonded Risk-averse investors are now selling stocks and fleeing towards the bond market, which is showing some worrying signs. The yield curve inverted, which is typically seen as a sign that investors are forecasting a recession. Basically, the government borrows money by selling a bond, which is seen as one of the safest and most reliable investments you can make. Bonds are often sold on the secondary market at different return rates. An inverted yield rate means that at the moment, bonds with more immediate returns are seen as a safer bet than ones you hold on to for a while. This means that investors believe that a downturn is coming, and soon interest rates and thus bond returns, or the overall worth of the bond, will drop. A recession has followed the last 5 yield curve inversions. Fed Up While China’s slowing economy is at the root of the problem, President Donald Trump’s tariff war has only exacerbated things. Trump demonstrated his famous chill today when attacking Federal Reserve Chair Jay Powell, saying he has been too slow to cut interest rates, and that the recent cut from 2% to 2.25%, the first since 2008, wasn’t nearly enough. Or as Trump put it on Twitter: “We should easily be reaping big Rewards & Gains, but the Fed is holding us back. We will Win!” -Michael Tedder Photo by Adobe