3 Smart Steps to Survive a Stock Market Selloff
Not to be a buzz kill, but there’s plenty to suggest a stock market selloff is on the horizon. Federal Reserve Chair Jerome Powell indicated in his recent policy speech at Jackson Hole, Wyo., that the central bank stood poised to “use our tools forcefully” to combat rising inflation. That translates to a higher interest rate environment, meaning that deflation may be coming. Fundamentally, should the Fed aggressively rein in soaring consumer costs, the result would be fewer dollars chasing after more goods. Such an environment would lift the purchasing power of the greenback. Indeed, precedence for this already exists. In the early years of the Great Depression, purchasing power increased by nearly 38%. Therefore, a stock market selloff implies a strengthening currency. But why would equities decline if the U.S. dollar gains strength? It comes down to the economic incentivization between stasis and kinesis. In an inflationary environment, investors must do something (kinesis) to prevent their wealth from eroding.
3 Smart Steps to Survive a Stock Market Selloff
Not to be a buzz kill, but there’s plenty to suggest a stock market selloff is on the horizon. Federal Reserve Chair Jerome Powell indicated in his recent policy speech at Jackson Hole, Wyo., that the central bank stood poised to “use our tools forcefully” to combat rising inflation. That translates to a higher interest rate environment, meaning that deflation may be coming. Fundamentally, should the Fed aggressively rein in soaring consumer costs, the result would be fewer dollars chasing after more goods. Such an environment would lift the purchasing power of the greenback. Indeed, precedence for this already exists. In the early years of the Great Depression, purchasing power increased by nearly 38%. Therefore, a stock market selloff implies a strengthening currency. But why would equities decline if the U.S. dollar gains strength? It comes down to the economic incentivization between stasis and kinesis. In an inflationary environment, investors must do something (kinesis) to prevent their wealth from eroding.