Economics professor discusses bear market impacts on the Coastal Empire

SAVANNAH, Ga. (WTOC) - Americans are facing a triple threat to their finances. U.S. stocks have dipped into a bear market.

That means the index has dipped at least twenty percent below its most recent high. The Federal Reserve is expected to increase interest rates tomorrow.

And, some economists say a recession is likely.

Dr. Michael Toma, a Professor of Economics at Georgia Southern University, says the main problem right now that’s causing the price of goods to go up higher than normal levels is inflation.

“There’s no single magic bullet. It’s a combination of supply-side factors, primarily supply-side factors.”

Dr. Toma says those include energy prices increasing because of war in Ukraine, manufacturing closures, temporary shut-downs in Asia, and shipping issues.

Toma says in addition, trillions of dollars dumped into the U.S. economy throughout the pandemic have also led to what he referred to as a hangover of sorts.

“I have a fairly strong sense that the Fed is going to drive us into a recession or pretty close to it to try and wring out that inflation. That’s what it’s going to take. It’s going to take probably a mild recession to really push the inflation rate back down to a two or three percentage point range that’s preferred by the Fed.”

Toma added a typical market rebound after entering a bear market is within a year. But he says he thinks the rebound ahead will take a little longer.

Still, he says because of what our region has, including manufacturing, military bases and a robust tourism industry, his outlook for any impacts of a recession on the Coastal Empire are optimistic.

“The economy in our region is fine. There will be some economic instability at the macro level, the national level.”

Toma says it’s important for people, like those invested in the stock market, to try not to overreact and consider looking at the sinking prices of stock as an investment opportunity.

“It’s painful in the short run now. The fundamentals of the economy, the U.S. economy is one of the strongest economies in the world. It will weather out a minor recession in the short run. The supply-side issues will resolve, not immediately. But over the next two years or so, we’ll be back on a normal growth trajectory.”

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