On Friday, June 5, stocks took a steep dive. All three indices showed a loss for that day and for the five-day period preceding it. This raises the very important question of whether this is a temporary setback or the beginning of a long down trend.
While pondering the answer to that question, it pays to keep stock prices in perspective:
PERFORMANCE BY INDICES, AS OF JUNE 5, 2026:
| 1 DAY | 5 DAYS | 1 MONTH | YR to DATE | 1 YEAR | |
| S&P 500 | (2.4%) | (2.74%) | 0.87% | 7.66% | 23.05% |
| DOW JONES | (1.35%) | (0.55%) | 2.05% | 5.13% | 18.95% |
| NASDAQ | (4.18%) | (4.82%) | 0.48% | 10.65% | 31.64% |
Source: Google Search / Numbers in parentheses are negative.
While there is no way to predict future performance with any degree of certainty, we can generate an educated guess as to what caused Friday’s tumble.
This issue is relevant not only to wealthy individual investors, but to many common folks as well. Many of them are invested in the stock market, whether they realize it or not, via their group or individual retirement arrangements.
It has been established that historically investors prefer an economic environment in which interest rates are low. To that end, they have been hoping for, as has President Trump, a lowering of the federal funds rate by the Federal Reserve System’s Federal Open Market Committee (FOMC).
The newly-confirmed new Chairman of the Federal Reserve System, Kevin Warsh, appears to be more inclined to favor a reduction in the federal funds rate than his predecessor Jerome Powell. But such reduction is not likely this year considering an already expanding economy and a high level of inflation.
A solid indicator of an expanding economy is the number of jobs created. On June 5, the U. S. Bureau of Labor Statistics reported the number of jobs created in May at 172,000, which is about twice the number predicted. The Bureau also adjusted upward the numbers for March and April, so that they are now 214,000 and 179,000 respectively.
Regarding inflation, the most-common prediction is that it will show an increase over the April rate of 3.8% when the May numbers are released by the Bureau of Labor Statistics on June 10.
The combination of high economic activity and the specter of continuously climbing inflation rates have pretty much wiped out any hope that the members of the Fed’s Federal Open Market Committee would reduce interest rates at their June 16-17 meeting, or any time this year. In fact, some observers are fearing that there will be an increase before the end of the year.
These conditions may explain, at least partially, the decline in the sock market on June 5.
“…investors prefer an economic environment in which interest rates are low…”
Undoubtedly, cheap money is good for investors, but investors do not an economy make. While I appreciate what OrangeManBad is trying to do, gov’t mgmt of the economy always creates a bubble and Joe Public, i.e. not investors, is left holding the bag. The market must be set free to set lending terms, or we – like FDR – will turn run-of-the-mill doldrums into something truly spectacular.
A little more Hayek and a lot less Keynes is what I’m say’n.