Wall Street tumbles before Fed meeting

The US stock market falls 500 points at the end of the trading day.

US stock trader Source: Bloomberg

Wall Street continues its downward spiral. The US stock market closed at its worst point in a year and a half.

The Fed driving investing fears

US investors are worried that the economy is entering a bear market. Two issues that should be independent of the US stock market are driving investors to sell off shares: the US Federal Reserve and the potential repeal of Obamacare.

The US Federal Reserve is having its winter meeting and is considering a rate hike. The potential raise in interest rates led US President, Donald Trump, to tweet in anger.

‘It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!,’ tweeted Trump.

Trump’s tweet against the Fed could backfire. The Federal Reserve could raise rates to prove its independence from the US president.

Michael Arone, chief investment strategist at State Street Global Advisors, warns that the Fed may raise rates despite Trump’s messages.

‘If the Fed doesn't raise rates, it will look like it's succumbing to the bullying of Trump's tweets,' said Arone.

Obamacare affecting Wall Street

The repeal of the Affordable Care Act, or Obamacare, is at issue in the US stock market. The law provided private health insurance to millions of US residents. Since a Texas judge ruled that Obamacare was unconstitutional, healthcare stocks have dropped. Investors are concerned how a potential repeal of the law will affect the shares of health insurance companies.

How bearish market could influence 2019

The sluggish US markets in December could have an impact on stocks in the new year and even beyond. Financial experts are concerned that this could turn into a long-term economic downturn.

‘Investors are zeroing in on this idea of slower growth for 2019. More people are worried about a recession in late 2019 or 2020,’ said Arone.

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