The world’s richest men suffered declines in their net worth after stocks suffered their worst day in two years on Tuesday.
Jeff Bezos’ wealth plummeted by $9.8 billion and Elon Musk’s net worth plummeted by $8.4 billion. Musk remains the richest man in the world with a net worth of $256 billion, according to Bloomberg’s Billionaires Index. Bezos is second with $150 billion.
The wealth of Mark Zuckerberg, Larry Page, Sergey Brin and Steve Ballmer have all shrunk by more than $4 billion, while Warren Buffett and Bill Gates have lost $3.4 billion and $2.8 billion respectively.
The stock market slumped after the release of consumer price inflation, which fell slightly in August to 8.3% from 8.5% in July, the Labor Department said Tuesday.
However, the CPI rose 0.1% month on month in August, after remaining flat in July, government data showed on Tuesday, a disappointing result amid widespread expectations of lower inflation. during the month.
The stock market immediately plunged on the news and the US dollar soared as data showed US inflation had slowed less than expected.
The Dow Jones Industrial Average fell nearly 1,300 points on Tuesday as the news sparked a rout on the New York Stock Exchange. Tech stocks were trashed, falling more than 500 points, or 4.4%.
Bitcoin price also took a beating, falling 7.34% to $20,161. The crypto is down 41% in the past six months.
Ethereum price plunged 4% to $2389 and lost 30% this year.
Biden reacts to inflation report
President Biden struck a positive tone, saying the data showed progress in tackling inflation.
“This month, prices overall were essentially flat, gasoline prices were down and wages were up – that’s good news for American families.”
However, he acknowledged “it will take more time and resolve to bring inflation down.”
The Fed will hike rates aggressively
But the markets reacted negatively to the announcement of a decline in inflation at a slower pace than expected by economists.
The surprise result means that the Federal Reserve is increasingly likely to aggressively raise interest rates.
Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, told the New York Post“Inflation is the problem, but the key is in the labor market.
“As long as unemployment is extremely low and consumers are confident in their spending, it’s hard to imagine a scenario where the inflation problem will solve itself.”
He indicated that the Fed should make unpopular decisions in order to control prices.
“The Fed has the worst problem in the world – it’s a political problem, not an economic problem – and the only remedy for the current crisis is one that is politically unworkable,” Zaccarelli said.
“If the Fed thinks it’s been criticized too much by the previous administration (and it was), wait and see what kind of criticism it will get as it deliberately creates an economic scenario where unemployment jumps soaringly. meaningful.”
“Significantly warmer than expected‘
“Headline and core US CPI were significantly higher than expected in August,” said Monex market analyst Jay Zhao-Murray.
He added that this “caused the currency and fixed income markets to embark on a rapid and dramatic reversal from recent price action, where traders and investors had largely positioned themselves for a print of inflation. softer”.
He pointed to core inflation that excludes volatility in energy and food prices, something Fed policymakers are paying close attention to. This rose 0.6 percentage points month over month, compared to a 0.3 point gain in July.
While the markets were already widely anticipating a further 75 basis point interest rate hike by the Fed at its next meeting, it had been hoped that the overshoot of the inflation peak would allow the Fed to give in.
However, the inflation numbers were “warmer than expected in August and cooled some of the inflation spikes / hawkish spikes / soft landing chatter,” Briefing.com analyst Patrick O said. ‘Hare.
Stocks, which had rebounded in recent days on hopes that a spike in inflation would quickly end hawkish rate hikes and thus avoid a recession and achieve a “soft” landing for the economy, fell sharply.
The world reacts to bad inflation news
Fed chief Jerome Powell has indicated that rate hikes will continue until inflation is brought under control.
Zhao-Murray said market expectations for the next Fed rate hike had hardened on inflation data.
While some predicted the possibility of the Fed falling to a half-percentage-point hike, a 0.75-point hike is now seen as the bottom and some are forecasting a one-point hike.
Market analyst Michael Hewson said Tuesday’s core inflation figures mean more aggressive rate hikes will be needed to rein in rising prices.
“While the narrative of peak inflation still stands, bringing it down from these levels is likely to be a much tougher battle,” he said.
Inflation has soared around the world this year due to skyrocketing energy and food bills.
This was caused to a large extent by supply constraints after economies reopened after pandemic shutdowns and following Russia’s invasion of Ukraine.
The dollar soared as the Federal Reserve acted earlier and more aggressively than other central banks to raise interest rates and contain inflation.