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By now, you know that the U.S. Federal Reserve Board raised the so- called Fed Funds rate by three quarters of a percent—the largest increase since 1994. You may also have heard that the size of the increase took everybody by surprise—a list that includes economists, pundits, journalists and professional investors. The news drove the markets, already teetering on the edge, into bear market territory—defined as a 20% drop from previous highs.
When the market drops, some investors lose perspective that downtrends and uptrends are part of the investing cycle. When stock prices break lower, it’s a good time to review common terms that are used to describe the market’s downward momentum. A pullback represents the mildest form of a selloff in the markets. You might hear an investor or trader refer to a dip of 5-10% after a peak as a “pullback.”
Remember when a carton of a dozen fresh eggs cost 45 cents, a pound of sliced bacon was selling for 43 cents and ten pounds of potatoes cost 86 cents?
Chances are, you don’t, because that was back in 1930. But it illustrates how years of inflation can erode the value of the dollars you have to spend when you visit the grocery store. If you want to see that erosion over time, there’s an interesting website that shows the cost of various groceries in each year starting in 1930, and the bottom line is that there were steady cost increases over the past 92 years.
rebel Financial is a Registered Investment Advisor that provides retirement planning, estate planning, financial planning, and investment management services to individual and institutional clients. To get a more detailed description of the company, its management, and practices, view our (form ADV, Part2A) and Disclosures.
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