After stocks experienced their worst day in two years on Tuesday, the wealthiest men in the world saw a decline in their net worth.
Elon Musk’s net worth decreased by $8.4 billion, while Jeff Bezos’ wealth fell by $9.8 billion. With a net worth of $256 billion, Musk is still the richest person in the world, according to Bloomberg’s Billionaire Index. With $150 billion, Bezos comes in second.
While Warren Buffett and Bill Gates saw losses of $3.4 billion and $2.8 billion, respectively, the wealth of Mark Zuckerberg, Larry Page, Sergey Brin, and Steve Ballmer decreased by a combined total of more than $4 billion.
The Labor Department reported on Tuesday that consumer price inflation decreased slightly in August from 8.5% in July to 8.3%, which sent the stock market into a tailspin.
Nevertheless, according to government data released on Tuesday, the CPI increased by 0.1% on a monthly basis in August after remaining unchanged in July. This was a disappointing development given that many people had anticipated a decrease in inflation for the month.
Data revealed that US inflation reduced less than anticipated, which caused the stock market to quickly crash after hearing the news and the US dollar to soar.
As a result of the news causing a crash on the New York Stock Exchange, the Dow Jones Industrial Average dropped close to 1,300 points on Tuesday. The price of tech equities plummeted by more than 500 points, or 4.4%.
Additionally pummeled, the cost of bitcoin fell 7.34% to $20,161. Over the last six months, cryptocurrency has fallen 41%.
Ethereum’s price dropped 4% to $2389 and has lost 30% of its value this year.
Biden reacts to inflation report
The numbers, according to President Biden, demonstrated success in battling inflation.
“Good news for American families this month: Costs were practically unchanged overall, gas prices were down, and incomes were up.”
But he recognized that “bringing inflation down will require more time and effort.”
Fed to hike rates aggressively
Markets, however, responded unfavorably to the information that inflation was declining more slowly than anticipated.
The unexpected outcome increases the likelihood that the Federal Reserve will raise interest rates sharply.
According to Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, the labor market holds the solution to the inflation issue.
“It’s difficult to envision a situation where the inflation problem resolves itself as long as unemployment is extraordinarily low and consumers are secure in their spending.”
He suggested that in order to get prices under control, the Fed would have to make unpopular decisions.
The only solution to the current situation is one that is politically impossible, according to Zaccarelli. “The Fed has the biggest problem in the world. It’s a political problem, not an economic problem,” he added.
“Wait until they see the type of criticism they will be under as they deliberately create an economic scenario where unemployment jumps significantly,” said the author. “If the Fed thought they were criticized too much by the previous administration (and they were), wait until they see that criticism.”
‘Substantially hotter than expected‘
According to Monex market analyst Jay Zhao-Murray, “both headline and core US CPI were much higher than projected in August.”
In light of recent price activity, during which traders and investors had generally set themselves up for a softer inflation print, he continued, this was “driving currency and fixed income markets to embark on a rapid and dramatic turnaround from previous price action.”
He referred to core inflation, which excludes volatile energy and food costs and is the measure that Fed policymakers focus on most. In August, this increased by 0.6 percentage points compared to July’s 0.3-point increase.
Although the markets had already essentially priced in another 75 basis point increase in interest rates by the Fed at its next meeting, there had been optimism that the Fed would show some leniency after passing the inflation peak.
However, according to Briefing.com analyst Patrick O’Hare, the inflation statistics were “hotter than predicted in August and put a chill on some of the peak inflation/peak hawkishness/soft landing rhetoric.”
Stocks suddenly fell negative after recovering recently on expectations that a peak in inflation would put a quick halt to hawkish rate hikes, preventing a recession and achieving a “soft” landing for the economy.
World reacts to bad inflation news
Jerome Powell, the head of the Fed, has stated that rate increases will continue until inflation is under control.
Zhao-Murray claimed that following the inflation report, market expectations for the Fed’s upcoming rate hike had become more pessimistic.
While some predicted that the Fed might only raise interest rates by half a percentage point, today a 0.75-point increase is thought to be the minimum, and some are projecting a one-point increase.
Core inflation data released on Tuesday, according to market expert Michael Hewson, indicate that more aggressive rate increases will be required to contain inflation.
While the theory of peak inflation might still hold true, he added, “the fight to bring it down from these levels is likely to be a lot tougher one.
Due to extremely high energy and food prices this year, inflation has increased dramatically worldwide.
Supply shortages that developed when economies emerged from pandemic lockdowns and during Russia’s invasion of Ukraine are largely to blame for this.
The Federal Reserve increased interest rates and combatted inflation earlier and more forcefully than other central banks, which caused the currency to surge.