Why Are Stocks Falling Over the Worry of a 1% Change in Rates?
Stocks dropped on Friday, Monday, and Tuesday after last Friday's announcement that inflation came in higher than expected. The net drop was enough to officially put the S&P 500 in bear market territory. A key driver of that decline was the worry that the Federal Reserve may have to raise rates by 100 basis points -- one full percentage point -- in order to start to tame inflation.
On the surface, a 1% increase in rates may not really seem so bad. It certainly doesn't seem crazy enough to justify a massive sell-off after the market had already dropped as far as it already had in 2022. After all, a 1% increase in rates works out to an extra $100 per year -- about $0.27 per day -- for every $10,000 borrowed. The bigger problem isn't really on the borrowing side of a 100-basis-point increase in rates, it's on the investing side of such an increase.
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Source Fool.com
