Daily Scoop 22-6-13

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Today's Scoop:Fear

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Big Picture

1. Inflation has not yet peaked.

2. Persistent inflation may force policymakers to restrict the economy more aggressively.

3. Investors are getting more conservative as they worry about a possible recession.

The Market: 

⬇️

-3.9%

S&P 500: 3,749.63

1Mo:

-6%

| 1Yr:

-12%

| 5Yr:

+54%

Markets tanked today - from stocks to bonds and crypto - as

investors worried about the combination of inflation and the Fed's potential policy response to inflation pushing us into recession.

On Friday, the Bureau of Labor Statistics released the May Consumer Price Index data, showing

inflation hitting a new +40-year record high

. The prices of basically everything consumers spend money on jumped 1% in May, now 8.6% higher than a year ago.

Everyone was watching this inflation data release because

it looked like we may have been through the worst of it

, but it seems

inflation has not yet peaked.

This means the Federal Reserve will need to maintain its policy of

restricting the economy and possibly doing it even faster than planned.

Investors fear that the economy won't be able to handle the

negative impacts of persistently-high inflation

(consumers and businesses cutting back spending because things are expensive)

combined with the adverse effects of restrictive economic policy

(higher interest rates making borrowing more expensive, slowing spending and investment).

The inflation and recession fears worried investors enough to

cut back their risky investments

, trimming stock portfolios and bailing hard on crypto. Bitcoin fell to new 2022 lows as investors got conservative. The sharp pullback shocked the new markets, leading to some exchanges freezing transactions and exacerbating anxiety.

Company Scoops ❤🌎💰

(Click to dig in & vote your reaction, see how others feel)

Google's

engineer says they created a chatbot with a soul

-

Disney

keeps supporting "Gay Days"

-

Pfizer's

vaccine looks safe for toddlers

-

Goldman Sachs

investigated over ESG claims

-

DocuSign

struggles to keep pace

(These links only work for 24 hours while the story is live)

🤓 Inside Scoop...

The Federal Reserve

, aka the

Central Bank

, controls the flow of money. When the economy needs juice, it creates more money and lowers

interest rates

to incentivize more lending and spending. When

inflation

gets too high, that means there's too much lending and spending for the available resources. So, the Fed raises interest rates and starts to shut down all the supportive

stimulus measures

. In a regular economic cycle, inflation starts to get too high because the economy has recovered and no longer needs the extra boost. The fear now is that inflation will keep rising due to unusual global trade issues limiting supplies, not because demand is growing too strong, forcing the Fed to restrict the economy while it's not yet strong enough to handle it.

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