Bears continued to rule the market this week amid political turmoil in Washington, the forecast of a weakening housing market and the strong possibility of a rate hike next week.
The Dow took a beating this week and dropped over 576 points in the first three days of the week despite positive economic data about the slower pace of inflation and wage growth in February. Analysts believe the growing government deficit was partly responsible for setting a bearish tone early in the week, but as the mass exodus of staff in the White House continued, it certainly played a role because the market did not appreciate the uncertainty about who will replace key positions in the current administration.
However, the latest appointment of conservative media analyst Larry Kudlow as the head of the West Wing’s National Economic Council pleased Republican lawmakers and should revive confidence in the market.
In the end, the inflation rate in February slowed down a bit, but as the market seems to be pretty confident about a rate hike during next week’s Fed meeting, it was enough to trigger the sell-off.
Be sure to check out our previous week’s edition here, in which investors worried about a possible trade war.