Last week, stocks worldwide reached a low not seen since 2020, a sign that the global economy is weakening. There are growing fears that this could. Mean the start of a recession despite a strong job market. Now, in economics a recession is a significant and widespread downturn in economic activity, and a popular rule of thumb for identifying a recession is when there are two consecutive economic quarters of decline.
Forecasters are warning of serious economic hardship ahead. Banks are raising interest rates and that means money is more expensive to borrow for both businesses and consumers. The Federal Reserve has raised rates in the hopes that consumers will spend less, which reduce the supply of money in circulation. That would then lead to lower inflation and less economic activity. This is called cooling off the economy.
Economists say ideally the market will have a growth recession or a prolonged period of small growth and rising unemployment. The pain of this type of recession is still significant but it doesn`t pull the entire economy into a major decline the way a full-blown recession would.
All coming with punishing interest rate hikes, the last one just announced by the Fed.