Financial Markets Take a Hit

April's southward drift has continued in May as all three major stock indices fell yesterday by more than 3%. The tech heavy NASDAQ was down by 5% following the Fed's decision to raise their fund rates by a half percentage. The Fed Rate remain below 1% with inflation officially clocking in at 8.5%. Bond yields continue to rise which means currently held bonds are losing value. The yield on the ten year US bond is now slightly over 3%. In 2020 the yield fell below .5%. Oil remains firmly over $100/barrel and metals have been sluggish amid expectations of further interest rate hikes. Bitcoin fell sharply and as of this post is trading under $36k. Broadly speaking Wall Street seems to be less than impressed by the Fed's actions to curb inflation and the expectation is that even if inflation peaks, it is likely to remain high in the near to intermediate term. Some observers have noted that according to the Taylor Rule, interest rates should be near 10%. But a move that high would almost certainly plunge the country into a severe recession.  It now appears that with the inflation genie out of its bottle, getting it back in is going to be both challenging and painful.