Trump says Federal Reserve ‘has gone crazy’ after big stock drop

Kenny Grant
October 12, 2018

There's nothing like watching the stock market take a trillion-dollar one-day loss to get your attention.

Trump's latest attack on the USA central bank appeared to blame the Federal Reserve for a stock rout that market analysts mostly attributed to fresh concern about his trade war with China. "But I think the fed has gone insane".

Analysts attribute some of the recent share price declines to sales by investors anxious that trade tensions will hurt growth, while trade tariffs and rising interest rates raise costs for businesses. "I think that's the reason the stock market continues to perform well..."

Numerous biggest U.S. names fell hard, with Apple, Boeing and Facebook all slumping more than four percent and Amazon, Nike and Microsoft dumping more than five percent. Meanwhile safe bets, such as utilities and consumer staples, were the only positive notes in the sell-off.

While the Australian stock market generally takes its lead from the USA market, it has been trending down over the past month and a half while the Dow Jones had been scaling new heights until last week. Republican critics tend to want the Fed to raise rates more quickly, not more slowly. The Dow Jones Industrial Average more than doubled under Presidents Reagan and Obama, more than tripled under President Clinton and fell 27% under President George W. Bush.

Bourses in Paris and Frankfurt both lost more than 2%, while London fell 1.3%. The Standard and Poor's 500-stock index hit its longest losing streak in two years. Netflix, for example, is still up more than 60 percent for the year, and Amazon is up almost 50 percent.

The Australian market is trading at a prospective price-earnings ratio of around 14.5 times and is off 7 per cent from its peak in late August.

Stocks in Asia and Europe took even steeper losses. USA stocks opened lower on Thursday.

In fact, "interest rates are very low given how strong the economy is, given where inflation is and given where unemployment is", Mr Wessel said.

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Trump has said he likes low interest rates, in part because of his background in real estate.

At the same time, he ruled out firing Federal Reserve Chairman Powell. This implies they now see a greater possibility that growth and short-term interest rates could surprise by rising faster than forecasters now project. Now the Fed's own projections are consistent with the path of rate increases priced into markets.

President Donald Trump said he won't fire Federal Reserve Chairman Jerome Powell but blamed an "out of control" US central bank for the worst stock market sell-off since February.

Powell and Trump haven't personally discussed the matter, the Fed chair has said, but Trump's rhetoric has alarmed some Democrats and Republicans on Capitol Hill. "They're so tight. I think the Fed has gone insane". "The Fed has not gone insane".

When you see things like this happening - stocks tanking, long-term interest rates rising rapidly, various supposed experts holding forth - it's tempting to run around, shriek and react to what's going on right now. "I think what they're doing is wrong".

That makes it even more important for the Fed to be watchful for inflation.

The declines come on the heels of an eye-watering Wednesday session that saw the Dow plunge 831.83 points or 3.2 per cent, to 25,598.74.

"We're quite removed from the political process", Powell said in an interview last week at the Atlantic Festival in Washington. The Kospi in South Korea fell 4.4 percent.

Luxury retailers tumbled after LVMH, the parent of Louis Vuitton, said its sales growth in China slowed.

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