$DIA, $SPY, $QQQ, $RUTX, $VXX
President Trump blames the Fed for putting the US economy at risk while data shows an economy in “reasonably good” shape, as the Chairman of the central bank recently said.
But,”reasonably good” is not what President Trump promised to deliver during his Y 2016 campaign, and at this point he heads into a reelection year short of the Key economic goals he set and worried a recession could undermine his bid for a 2nd term.
Growth is ebbing and below the 3% annual rate he said his administration would hit.
The trade deficit has widened and there is no sign of the “easy” victory he said would come in a trade dispute with China, and business capital spending of late has been a drag on growth overall.
Each month there are more jobs. But that has been true for nearly 9 years, and as on many fronts the best days of “Trumponomics” may be in the past as the economy’s performance reverts to an Obama-era trend of 1.9% annual growth.
“He is so focused on the Fed because in terms of avoiding a recession that is truly in his eyes his biggest obstacle,” to reelection, a WH source explained that President Trump wants to take no chances, even if the risk of a downturn is low.
It’s in that context that President Trump scorns a central bank whose longer-term approach to policy has clashed with his immediate interests for the nation’s economy.
The Fed’s goals of “maximum employment, stable prices, and moderate long-term interest rates” are distinct from, and sometimes in conflict with, the economic priorities of President Trump, whether it’s maximizing annual growth, gaining leverage in a trade negotiation or, gaining economic momentum in an election year with interest rates lower than the data would warrant.
Of course, lower interest rates can boost economic activity by encouraging households and businesses to borrow, spend, invest, and less of a concern today: inflation.
Market traders are expecting the Fed to cut rates 2X this year, and some bond pricing may reflect a rising risk of a recession, Fed officials feel a downturn is unlikely and that they have matters in hand.
President Trump differs, he wants more now.
“It certainly became clear to me with the Mexico situation … that trade policy uncertainty is going to be high. It is going to be high into the foreseeable future,” St. Louis Fed President Bullard said. “We’ve adjusted for the ratcheting up … Let’s wait and see how the economy responds to that.”
I expect the President Trump will get his rate cuts in September and December, Wall Street loves cheap money,
Monday, the major US stock market indexes came in at: DJIA -391.00 at 25896.44, NAS Comp -95.73 at 7863.42, S&P 500 -35.96 at 2882.69
Volume: Trade on the NYSE came in lite at 427-M/shares exchanged
- NAS Comp +18.5% YTD
- S&P 500 +15.0% YTD
- DJIA +11.0% YTD
- Russell 2000 +10.8% YTD
HeffX-LTN overall technical outlook for the major US stock market indexes is Bearish in here.
All 11 S&P 500 sectors are down with losses ranging from 0.5% (utilities) and 2.0% (financials).
Interestingly, WTI Crude Oil settled +0.4%, or $0.20, higher at $54.81 bbl despite the evident concerns about global growth.