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Economists still optimistic despite Dow's 240-point drop on Monday

Many experts believe the Federal Reserve could lower interest rates this summer.
Economists still optimistic despite Dow's 240-point drop on Monday
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Despite starting the week on a lower note, the Dow Jones Industrial Average is still within striking distance of the  40,000 threshold, which has never been hit in its 128-year history. 

The Dow fell 240 points to close at 39,566 on Monday. 

The Federal Reserve has kept interest rates unchanged, but officials are maintaining their forecast of three rate cuts this year. Many experts are saying this could signal a drop in interest rates this summer — but another major factor people need to pay attention to is their 401(k) investments.

"Any of your assets, your retirement savings that are invested in the stock market or in similar instruments now have greater value than they did even, say, at the first of the year," said David John, a senior policy adviser with AARP.

John said those with retirement savings accounts like a 401(k) or IRA will see a boost in their retirement plans. That boost follows a report from Fidelity Investments that showed that the number of people with $1 million or more saved in their 401(k) accounts jumped 20% from September to December of 2022. 

"And that gives people an additional sense of security and comfort," John said.

But experts like John say there are always risks with the stock market. 

"Just because it's going up at this point in time doesn't mean that it's not going to go down in the future," John said.

He says it's important to take into account the short-term rises and falls of the stock market, and to pay attention to inflation and interest rates as well. This is important for folks planning out their retirement and those looking to borrow money to buy houses, or people with credit card debt. 

"I think when the Federal Reserve makes their decision about interest rates, they do pay attention to the stock market, but not entirely on the stock market," said Kishore Kulkarni, a professor of economics at MSU Denver. "They also look at other things as well, but the other things that they look at is the inflation rate, and the inflation has slowed down to 2.8%."

Kulkarni said the Federal Reserve has already indicated plans to reduce the interest rate, possibly as soon as June.

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