Jason Furman, a Harvard professor and former presidential economic adviser under Barack Obama, said in a recent interview that current market volatility is inevitable given the Federal Reserve’s interest rate hikes as it combats inflation. He said, “One thing that runs through the entire economy is interest rates, When interest rates go up, it becomes more attractive for investors to move their money into bonds and out of stocks, and that causes stocks to fall.”

The Federal Reserve has been gradually raising rates since March, as it tries to gain control of inflation, the latest reading of which sat at 8.3%. Furman sees this as the predominant force affects the markets, even more so than the COVID lockdowns in China and supply chain snags.

He maintains two bright spots which point to the current instability resulting in a soft landing are the fact that Consumer Activity remains high and the evening out of gasoline prices. Combined with the $2.3 trillion of excess savings amassed by U.S. buyers during the pandemic, Furman believes there is plenty of reason for optimism that consumers will be able to continue to spend through the inflation.