Mark Zandi, a Moody’s economist, projects a 20% decline in the US stocks as the Federal Reserve tightens its policy triggering a potential correction.
- The increase in interest rates will likely lead to a decline in the value of the earnings of the US companies.
- The equity market is facing a potential correction of around 10% to 20% as the stock prices have enjoyed a bullish trend since March 2020.
- Zandi’s projections aligned with a sudden stock market sell-off, which led to one of the worst weeks of Dow Jones Since October 2020.
The Fed is likely to raise rates in 2022 to sustain the higher-than-expected inflation rates. The rising interest rates will make the earnings of stock less attractive as the interest rates will hurt future earnings of the companies.
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