Offbeat: What Trump’s tirade against ‘loco’ Fed means for the markets - PressFrom - US
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Offbeat What Trump’s tirade against ‘loco’ Fed means for the markets

13:05  11 october  2018
13:05  11 october  2018 Source:   marketwatch.com

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President Donald Trump ’ s branding of the Federal Reserve ’s policy actions as “crazy” and “ loco ” following Wednesday’s steep stock- market selloff seemed both shocking and inevitable. The question for investors is whether it will make any difference at the Fed .

Anti - Trump professor, Dr. Carol Christine Fair, is no longer teaching classes at Georgetown University following calls for the outspoken liberal educator to be Trump doubles down on Fed attacks, saying it’ s ‘going loco ’. U. S . President Donald Trump continued his tirade against the Federal Reserve in a

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President Donald Trump’s branding of the Federal Reserve’s policy actions as “crazy” and “loco” following Wednesday’s steep stock-market selloff seemed both shocking and inevitable. The question for investors is whether it will make any difference at the Fed.

So far, analysts seem to doubt the remarks, the latest and strongest in a series of criticisms of the central bank’s gradual tightening of monetary policy, will have much impact.

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Offbeat Trump doubles down on Fed attacks, saying it’ s ‘going loco ’. 07:30 11 october 2018. U. S . President Donald Trump continued his tirade against the Federal Reserve in a late Wednesday television appearance, laying into the central bank’ s policy decisions and suggesting it is to blame for

President Donald Trump ’ s branding of the Federal Reserve ’s policy actions as “crazy” and “ loco ” following Wednesday’s steep stock- market selloff seemed both shocking and inevitable. The question for investors is whether it will make any difference at the Fed .

Read:Trump says the Fed has ‘gone crazy’ after the Dow tumbles 830 points in one day

In fact, for much of 2018 the U.S. economy has ignored a turn in the global economic cycle, leaving U.S. equities unfazed by falling emerging-market equities and currencies, said Kit Juckes, global macro strategist at Société Générale, in a note.

Also see:Why one economist says Trump is right about the Fed

“This week has seen the S&P, and the Nasdaq, sit up and pay attention to what’s going on. The president’s criticism of the Fed adds color, but no real substance to the situation. It has long been assumed by market participants that when global market malaise finally transfers to the U.S., the Fed will pay attention and the dollar’s rally will start to run out of steam.”

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"The Fed is going wild. I mean , I don't know what their problem is that they are raising interest rates and it' s ridiculous U. S . President Donald Trump continued his tirade against the Federal Reserve late Wednesday, laying "The problem [causing the market drop] in my opinion is Treasury and the Fed .

See: What Trump ’ s tirade against ‘ loco ’ Fed means for the markets . The wiser path for the Fed chair is to avoid talking about policy needing to move into restrictive territory until next year. Stocks DJIA, +0.03% were set to tumble again after Wednesday’s broad rout.

Trump, responding to the market selloff Wednesday afternoon, said that monetary policy is “so tight. I think the Fed has gone crazy” and doubled down on the comments in a later interview with Fox News, saying he wasn’t happy with the Fed. The central bank “is going loco and there is no reason for them to do it,” he said.

Trump has criticized the Fed several times in 2018, but Wednesday’s strong language even surprised investors who have been critical of the Fed.

“There is no doubt in my mind that this panic is all about Federal Reserve interest rate policy…The president should have chosen a better term than crazy (or as he also referred to the Fed as loco) but his sentiment is 110% correct,” wrote Scott Rothbort, president of LakeView Asset Management, in a note.

The Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX) both fell more than 3% on Wednesday for the worst one-day percentage decline since February, while the tech-heavy Nasdaq Composite (COMP) slumped more than 4% in its worst one-session skid since the U.K. voted to leave the European Union in June 2016. Stocks in Asia and Europe tumbled Thursday and U.S. stock-index futures pointed to further declines for Wall Street.

Trump doubles down on Fed attacks, saying it’s ‘going loco’

  Trump doubles down on Fed attacks, saying it’s ‘going loco’ U.S. President Donald Trump continued his tirade against the Federal Reserve in a late Wednesday television appearanceSaying he’s “not happy” with the Fed, Trump told Fox News he could’t understand why it was continuing to tighten U.S. monetary policy. The president has previously expressed displeasure with the central bank, and that’s led some to fear the institution’s independence is at risk.

OffbeatEx- Fed chief Greenspan: This is the tightest labor market I've ever seen. 15:45 18 october 2018. President Donald Trump ’ s branding of the Federal Reserve ’s policy actions as “crazy” and “ loco ” following Wednesday’s steep stock- market selloff seemed both shocking and inevitable.

Trump has been urging the Fed to stop raising interest rates, calling the central bank “ loco ” for tightening policy without any sign of inflation. See: What Trump ’ s tirade against ‘ loco ’ Fed means for markets . Yellen said she does not share the president’s dovish views. She backed continued rate

Trump has touted the stock market’s bull run over the course of his first term. Previous presidents were often reluctant to explicitly tie stock-market gains to policies out of fear that they would be saddled with the blame for downturns. In his remarks, Trump dismissed suggestions the selloff was triggered by trade tensions with China.

Meanwhile, many investors have argued that recent equity market weakness is the result of a sudden pickup in long-dated interest rates, with the yield on the 10-year Treasury note (BX:TMUBMUSD10Y) topping 3.26%, a more-than-seven-year-high, earlier this week. Yields and debt prices move in opposite directions.

Read:Why the stock market tumbled Wednesday, ushering in its worst start to a quarter in about 2 years

Michael Every, senior Asia-Pacific strategist at Rabobank, said the market action—and the White House’s reaction—merely show that even though unemployment sits at a multidecade low, the world is still addicted to the postcrisis combination of “high and higher asset prices and low and lower interest rates.”

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  Cramer: Trump shouldn't publicly attack the Fed, but I agree with him Jim Cramer lays out his reasons for why the Federal Reserve should back off its aggressive rate hike agenda.After all, with numerous indicators and the Federal Reserve indicating that the economy is strong, investors are probably wondering why the market would take such a drastic hit.

Check out: What Trump ’ s tirade against ‘ loco ’ Fed means for markets . An auction of 30-year Treasury bonds are also slated for 1 p.m. Eastern, which could help determine the market ’s appetite for long-date government paper as investors have bought around billion of newly issued U.S. debt

Trump himself later told reporters he would not try to oust Powell, Trump ’ s handpicked successor to former Fed chair Janet Yellen, and a The gradually rising rates, Fed officials say, are meant to guard against any quick run-up in inflation, while remaining low enough so far for the recovery and a strong

“It’s a sign of those kind of times when a daily stock rally of 3% is taken as a given, while a daily fall of the same amount requires an official White House statement that this is merely a bull market correction and that ‘the fundamentals and the future of the U.S. economy remain incredibly strong,’” Every said.

Trump’s frustration also comes amid expectations the Fed, under Chairman Jerome Powell, wouldn’t be as quick than it was previously perceived to be when it comes to reacting to stock-market weakness.

Investors have talked of a Fed safety net in some form or another at least since the October 1987 stock-market crash prompted the Alan Greenspan-led central bank to lower interest rates. Figuratively dubbed the “Greenspan put,” it was later referred to as the “Bernanke put,” after his successor Ben Bernanke, following the Fed’s aggressive monetary-policy actions in the wake of the financial crisis. It eventually gave way to the notion of a “Yellen put,” in reference to Powell’s predecessor, Janet Yellen.

Archive:A ‘Powell put’ for the stock market? Don’t even think about it

An actual put option gives the holder the right but not the obligation to sell the underlying asset at a set price, serving as an insurance policy against a market decline. Central bankers dismiss the notion of any sort of a “Fed put,” arguing actions are driven by concerns about financial stability and their economic mandates.

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Check out: What Trump ’ s tirade against ‘ loco ’ Fed means for the markets . Continuing trade tensions with China and concerns about global growth have also been cited as factors behind the equity market ’s downturn. In the latest economic data, jobless claims rose by 7,000 in the latest week

The Fed has already increased rates three times in 2018 and is expected to lift benchmark rates a fourth time in December, as well as continue its gradual tightening trend in 2019 Yields had stabilized somewhat by Thursday. Check out: What Trump ’ s tirade against ‘ loco ’ Fed means for the markets .

Mohamed El-Erian, chief economic adviser at Allianz, told CNBC in a Wednesday interview that the market “has to realize that this is a different Fed.”

“The Fed put, as people like to call it, is way out of the money now,” he said, and argued the Fed would be reluctant to change course given solid prospects for the U.S. economy for the next two years thanks to strong business investment, rising household income and supportive fiscal policy.

Some observers have argued that criticism of the Fed could even be counterproductive, with central bankers more likely to stick to a tightening path out of fear of the perception that their independence has been compromised.

”The fall in equity markets could put some pressure on the Fed, but the comments from Trump are probably in themselves working in the other direction. Indeed, as central bankers sometimes put it, ‘we are like whipped cream—the more you beat us the harder we become,’ said Christin Tuxen, chief analyst at Danske Bank, in a note.

Others, such as LakeView’s Rothbort, held out hope that the Fed would back off.

“We have a saying on Wall Street to not fight the Fed. The fight may have begun but I hope that the Fed learned its lessons from the past and lays its gloves down,” he said.

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