As US equity markets continue to slide, headlined by the more than 3% fall in the S&P yesterday which was the most significant one day drop since February this year, Trump has once again grabbed headlines with a verbal attack on the Fed.
Speaking with acclaimed international news broadcaster Fox News, the president said that he is “not happy” with the Fed regarding its current tightening policy. The President has publicly slated the Fed several times this year and seems to be enjoying the negative he receives from doing so.
This time around the controversial president said “The problem I have is with the Fed. 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.”
Commenting on the slump in equity markets, Trump said “The, in my opinion, is Treasury and the Fed. The Fed is going loco, and there’s no reason for them to do it. I’m not happy about it.”
Concerns Around Fed’s Independence
Trump’s constant criticism of the Fed this year has raised concerns regarding the independence of the central bank which US president have traditionally refrained from commenting on. Indeed, Trump himself recently acknowledged the importance of the Fed’s political neutrality and independence.
Speaking to reporters at the White House earlier in the week the President said “I like to stay uninvolved with them” also adding that he had not spoken with Fed chairman Powell all year.
Following similar scathing attacks on the Fed earlier in the year, US Treasury Secretary Steven Mnuchin said: “We as an administration support the independence of the Fed.”
Following the Fed’s latest rate rise in September, the President expressed concern for the economy saying he was “worried about the fact that they seem to like raising interest rates, we can do other things with the money,”
With US data continuing to encourage the Fed’s view that the economy is moving strongly, the Fed has raised rates three times this year, now sitting at the 2% – 2.25% level, following three .25% increases. Indeed, at its latest meeting, the Fed signaled one further rate rise to come this year with a further three forecast so far in 2019.
Trump Hails Equities Opportunity
Speaking on the moves and the Fed’s outlook, Trump told supporters that he thinks “the Fed is making a mistake.” As ever, the President was full of inaccuracies and contradictions. In an effort to downplay the slump in equity prices this week, the President said that this was simply the “correction that we’ve been waiting for.” This seems a strange response given that Trump has often cited soaring equity prices as a signifier of his prowess as President and the strong health of the US economy.
Tech Sector To Blame?
Among the declines in equity prices, tech and luxury stocks were the worst hit with both Amazon and Microsoft losing 5% of their total value on Wednesday with Apple and Facebook both down 4%.
Indeed, many players suggest that the technology sector triggered the moves after the 4.1% drop in the Nasdaq. The market has been grappling with persistent risk factors this year linked to the ongoing trade war between the US and China, fuelling concerns of a slowdown in China, as well as Brexit fears and strain in the emerging markets linked to higher USD and higher oil prices.
After breaking back below the initial 2018 high of 2875.94, the S&P then cratered through support at the 2791.45 level and is now sitting on rising trend line support from late 2016, coming in just above the next structural support at the 2719.28 level with the rising trend line form 2016 lows coming in beyond that.