The stock market has been in a bearish state over the past few weeks, in tandem with most, if not all, asset classes. The bearish state was caused by uncertainty over the reforms that the Federal Reserve wanted to implement to curb the rising inflation levels.

On Wednesday, the Federal Reserve announced that the interest had been raised per market expectations. In the past, the institution said it wanted to tame the rising inflation levels without creating a recession.

Stocks tumble post-Fed announcement

On Thursday, stocks tumbled as the market came to the realization of what the raised interest rates would mean for the economy. The Federal Reserve had earlier refrained from raising the interest rates to prevent a recession.

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On Thursday, the S&P 500 index dropped by over 3% because of the global recession that hit the financial markets. In Europe and the US, top market indices and stocks recorded massive dips. After tanking again on Thursday, the S&P 500 index is now around 24% below its peak on January 3. The bear market that commenced on Monday seems to be becoming stronger.

The SPX index has also dropped below 3700 following the announcement. As the stock market crashes, other asset classes have also recorded massive dips. Some of the best cryptos have also tanked, and they have erased most gains made over the past year.

The Europe Stoxx 600 index declined by 2.5% following the recession, its seventh decline in eight days. The FTSE 100 also dropped by 3.1% on Thursday, as ripple effects made their way across the entire financial market.

Central banks fight to tame inflation

Inflation has been making waves globally, and most central banks are fighting to ensure the levels do not rise further. On Wednesday, the Federal Reserve approved its highest interest rate in over 25 years. The Fed officials acknowledged that inflation was being driven by events that were out of their control.

Other central banks are also following suit, with the Bank of England announcing its fifth interest rate hike. The central bank of Switzerland also increased the interest rates for the first time in 15 years. This was a more aggressive move than earlier anticipated.

The policymakers anticipate that hiking interest rates will raise the cost of borrowing and reduce the demand for goods and services. This will give policymakers enough time to return to normal.

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