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The rate hike plans in the United States also complement an approach that European Central Bank (ECB) board member, Isabel Schnabel believes will be ideal for the region.
The outlook for the stock market futures is currently very gloomy as a new broad-based selloff has gripped the broader financial ecosystem. The futures tied to the Dow Jones Industrial Average (INDEXDJX: .DJI) plunged by 253 points or about 0.8%. Those for the S&P 500 (INDEXSP: .INX) and the Nasdaq 100 dropped 0.9% and 1.1%, respectively.
Growth in the stock market, especially for indices, has been a major hassle over the past few weeks and the US indices have continued on a downward spiral to close the market lower on Friday. The S&P 500 dropped 3.4% as the bulk of the gains printed throughout August were eroded.
The Dow Jones slipped a little over 3% while the Nasdaq Composite (INDEXNASDAQ: .IXIC) went down by 3.9%. The fall was an encompassing one as even the Russell 2000 Index (INDEXRUSSELL: RUT) also more than 3% of its value on Friday.
The visible decline is at best linked to the comment from Jerome Powell, the United States Federal Reserve Chairman who hinted at more aggressive interest rate hikes at last week’s Jackson Hole Summit. To Powell and the other Central Bank leaders, getting inflation to the newly revised minimum benchmark of 4%, up from 2% is non-negotiable.
While the Feds will proceed with caution, raising these interest rates has sent an uncertainty shockwave into the industry as a whole, with visible reactions from investors.
“Investors again cut back on their recent Risk-On positioning, supporting our view that it is way too soon to call their recent risk appetite a more permanent stance, and now one more likely to have cost them badly,” Rick Bensignor of Bensignor Investment Strategies said in a note to clients.
Rate Hike Impact
The rate hike plans in the United States also complement an approach that European Central Bank (ECB) board member, Isabel Schnabel believes will be ideal for the region. According to Isabel, Central Banks must continue to fight inflation, which stood at 8.9% for Europe in the month of July.
Isabel said interest rates must continue to be increased, even if it tips economies into a recession. In the US, more speeches from Fed officials are expected moving forward, and they are projected to guide market reactions ahead of the non-farm payroll for August that is scheduled to be released this Friday.
While the traditional financial ecosystem is feeling the brunt of the potential interest rate hike, the nascent cryptocurrency ecosystem is also crumbling with losses engulfing the market. Bitcoin (BTC) has dropped by more than 5% in the past week, Ethereum (ETH) is down by more than 3.54% in the week-to-date period and a similar bearish grip has swept through the crypto ecosystem.