Wednesday, 16 January, 2019


Is The Fed Trying To Tank The Trump Economy Before The Midterms?

Trader Peter Tuchman works on the floor of the New York Stock Exchange Wednesday Oct. 10 2018. The Dow Jones Industrial Average plunged more than 800 points its worst drop in eight months led by sharp declines in technology stocks. (AP Is The Fed Trying To Tank The Trump Economy Before The Midterms?
Conrad Doyle | 12 October, 2018, 17:01

At the closing bell, the Dow Jones Industrial Average was at 25,049.65, down 2.1 percent or 545 points, bringing its losses for the week to more than five percent.

"If you look at the charts and you look at the way the market's behaving and you think about the trends that are underneath the bond market, it wouldn't be surprising at all to see the 30-year [yield] go to 4 percent before this move of the breakout above 3.25 percent is over", he told CNBC. The Standard and Poor's 500-stock index hit its longest losing streak in two years.

It's often said that stock markets, whether good or bad, are unfairly linked to whoever sits in the Oval Office. Netflix, for example, is still up more than 60 percent for the year, and Amazon is up almost 50 percent.

Jones points to the US 10-year treasury yield's 40-basis point surge since mid-August as evidence that investors see higher rates on the horizon.

Forecasters with Macroeconomic Advisers left their outlook for annualized gross domestic product growth unchanged at 3.7 percent for the third quarter and 2.6 percent for the fourth quarter. Many observers expected that would trigger a sell-off in the stock market as investors flooded their cash into Treasurys.

In February, when a selloff caused the S&P 500 to fall 10%, the president switched tactics, claiming the stock market had failed to reflect the strong economy. It is often tied to higher costs of borrowing for the federal government, which can spook investors. Amazon dropped another 3.4% on Thursday and Apple fell another 1.4%.

The central bank had raised the benchmark lending rate, which affects everything from mortgages to auto loans to bond yields, just twice before Mr Trump took office in January 2017, after a campaign in which he criticized the institution for allegedly keeping rates near zero in a bid to help his opponent.

Interest rates are rising. Now the Fed's own projections are consistent with the path of rate increases priced into markets.

President Donald Trump lashed out at the Federal Reserve for a second day following the worst US market sell-off since February, blaming the central bank for the stock rout that analysts mostly attributed to fresh concerns about his trade war with China.

"It's a correction we have been waiting for a long time", Trump said. "The Fed has not gone insane".

He has frequently criticised the USA central bank for gradually raising interest rates, and on Wednesday reiterated his position: "I really disagree with what the Fed is doing". "I think what they're doing is wrong", Mr. Trump said. This could be a worry for Fed officials trying to keep a lid on inflation. "The Fed is going to do what the Fed thinks it needs to do, Trump's criticisms notwithstanding", he said.

"The US tech bubble may take a while to burst and we are facing many external uncertainties - trade wars, risks in emerging markets currencies and oil price".

"This is just who we are and I think who we will always be, which is, we're a group who - we're quite removed from the political process", Powell said in a recent interview. "It's not a crash yet".

Sears nosedived after the Wall Street Journal reported that the struggling retailer hired an advisory firm to prepare a bankruptcy filing that could come within days.

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