Does the economy have you on edge? Let our expert explain how US financial woes could hit you at homeSeptember 26, 20222 min read
With inflation rampant, everyone is concerned about money and the economy -- not just the prices on everyday goods and services, but their investments as well.
The situation has people on edge.
Rick Franza, dean of Hull College of Business at Augusta University, said there are differences between the economy and the markets.
“Part of that is in the economy, we worry about now and the stock market is more forward-looking, so there’s always some disconnect between the financial markets and the economic reality," Franza said. "The disconnect seems to be worse than ever. There’s less correlation between the economic news and where the stock market goes.”
“We used to think that a good jobs report would make a good economy, and typically it does, but in the last couple of months when the jobs report was good, the market has tanked. People are reading it as the strong job market means inflation is not under control."
Franza indicated there is a fear factor when it comes to the stock market and its steady decline over the last nine months. Younger investors in the market haven’t seen many bad times, so they are fearful. He also said people nearing retirement are fleeing the market as well.
When it comes to the drop in the stock market, it affects anyone who has investments.
“Most of us have some kind of investments, especially in retirement accounts,” Franza added.
Inflation though, has been the dominating factor in the market right now.
"The impact of inflation will be more on small businesses. The large businesses will find a way to weather the storm. If inflation continues and companies can’t be profitable, they’ll start laying off people. Then we’ll have a recession, which will reduce inflation.”
It could also have a rippling affect on consumer choices and ultimately costs.
“If more companies go out of business, it’ll give us fewer choices, which means the supply chain will be restricted. Then, you’ll pay higher prices because of fewer options. In the long run, if the Fed sticks to its plan to keep raising rates, it will reduce inflation.”
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Richard Franza, PhD Faculty, James M. Hull College of Business
Dr. Richard M. Franza is a professor and former dean of the James M. Hull College of Business.