What happened
Amazon's (AMZN 3.25%) stock was falling today on seemingly no company-specific news. Instead, some investors may be pulling back from the stock today after its shares climbed nearly 10% last week, as they assess the risk of a potential economic slowdown.
Investors temporarily got excited about some stocks last week, pushing up the Nasdaq Composite by about 7.4%, but that excitement appears to have tapered off today. The e-commerce company was down 2.5% as of 2:29 p.m. ET Monday.
So what
Investors have been generally very pessimistic about the market lately as inflation has climbed to its highest level in four decades. To bring sky-high inflation back down, the Federal Reserve has committed to hikes of the federal funds rate throughout 2022.
Image source: Getty Images.
And while those rate increases could very well help slow inflation, they could also slow the economy down too much, and potentially spur a recession.
Amazon investors may have taken notice of an investor note by S&P Global today in which analysts from the firm estimated the risk of a recession next year to be at 40%.
"As we inch toward potential recession, we expect the Fed's stronger action to slow hiring and raise unemployment. Under such a scenario, the 'cure' for the U.S. economy and jobs market may feel worse than the disease," the S&P Global research note said.
Now what
Analysts and banks hardly agree about whether or not there will be a recession in the next year, let alone the percentage of probability for one. But even so, investors are taking a very cautious approach to stocks right now, in case an economic slowdown is on the horizon.
Amazon investors may be anticipating that if a slowdown does occur, it could hurt spending on the company's e-commerce platform and also slow down the company's lucrative cloud computing business.
No matter what happens, investors should anticipate more volatility in the market in the months ahead, but they should also remember that buying stocks in great companies and holding on to them for five years or longer is still the best way to earn significant gains in the market.
