Should you be worried about your money? Wall Street just saw its worst week in two years

Wall Street closed out a miserable September on Friday with the S&P 500’s worst monthly skid since March 2020, when the coronavirus pandemic crashed global markets.

The benchmark index ended the month with a 9.3% loss and posted its third straight losing quarter. It’s now at its lowest level since November 2020 and is down by more than a quarter since the start of the year.

The main reason financial markets continue to struggle is fear about a possible recession, as interest rates soar in hopes of beating down the high inflation that’s swept the world.

“Quite frankly, if it’s a deep recession you’re going to have to see more of a sell-off,” said Quincy Krosby, chief equity strategist for LPL Financial. “This is what the market is trying to navigate now.”

The Federal Reserve has been at the forefront of the global campaign to slow economic growth and hurt job markets just enough to undercut inflation but not so much that it causes a recession. On Friday, the Fed’s preferred measure of inflation showed it was worse last month than economists expected. That should keep the Fed on track to keep hiking rates and hold them at high levels a while, raising the risk of it going too far and causing a downturn.

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Americans are feeling more positive about the economy and believe inflation will settle down — but plenty of uncertainty is still swirling.

The University of Michigan’s consumer sentiment index for September settled in at 58.6, down slightly from preliminary readings of 59.5, according to findings from the school’s Surveys of Consumers. That’s the highest reading since April.

These mixed views were voiced by dozens of CNN Business readers, who said they thought the economy was improving somewhat, but were worried whether it would last. Many also said they continue to be burdened by high costs for food, housing and other necessities.

Consumer sentiment has rebounded significantly since hitting an all-time low in June as record-high gas prices weighed heavily on Americans’ finances. Despite the bounce back, sentiment levels are still comparable to those seen during the Great Recession.

All week, there have events in the news that have come in under of the banner of “this hasn’t happened since 2007/2008.”

Yields on the 10-year Treasury briefly surpassed 4%, a level not seen since 2008. That movement helped push mortgage rates to their highest level, 6.7%, since — wait for it — July 2007. Across the pond, where the UK bond market crashed earlier this week, one seemingly frazzled London banker told the Financial Times: “At some point this morning I was worried this was the beginning of the end. It was not quite a Lehman moment. But it got close.”

The timing of all these events is indeed a bit spooky: Today, September 29, marks 14 years to the day that stock markets around the world cratered, ushering in the worst global financial crisis since the Great Depression.

With all that gloom, it’s natural to wonder whether history is about to repeat itself.

Six months of contraction is a long-held informal definition of a recession. Yet nothing is simple in a post-pandemic economy in which growth is negative but the job market strong. The economy’s direction has confounded the Federal Reserve’s policymakers and many private economists since growth screeched to a halt in March 2020 as COVID-19 struck and 22 million Americans were suddenly thrown out of work.

Inflation, meantime, remains near its highest level in four decades, though gas costs and other prices have eased in recent weeks. Inflation is still so high that despite pay raises many workers have received, Americans’ purchasing power is eroding.

Stocks and bonds are trading in bear territory. And given current circumstances, it’s fair to assume the markets will remain volatile for awhile. And investors may see a lot more churn over the next year.

While it may be a bumpy road ahead, here are some ways to mitigate the potential damage to your long-term nest egg.

Are you happy with your current bank? Pennywise podcast host Teri Barr spoke with Chanelle Bessette, a banking expert with NerdWallet, to learn why right now may be a good time to make a change. Bessette also shares four important things to consider if you are ready to open a new account or go to a different bank, altogether.

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