Why Trump Blaming Fed Might Not Help Markets Recover



Trump blames the Fed

On October 23, President Donald Trump directly blamed Federal Reserve chair Jerome Powell for threatening “U.S. economic growth” during an interview with the Wall Street Journal. Trump said, “Every time we do something great, he raises the interest rates,” and it “almost looks like he’s happy raising interest rates.”


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Market sell-off continues

In August, Trump said in an interview with Fox & Friends, “I tell you what, if I ever got impeached, I think the market would crash, I think everybody would be very poor,” BBC reported. Now, when the market crash has already begun during his time in office, he has started blaming the Fed for the economic turmoil.

As of October 23, the S&P 500 Index (SPY) has lost 5.9%, and if it ends the month without much change, then it would be the worst month for the benchmark since September 2015. Today on October 24 at 2:15 PM EST, the market was trading with 1.7% losses from the previous session’s closing.

Investors’ pain

While interest rate hikes could be one of the factors hurting investors’ sentiments at the moment, they act as an effective tool for central banks to curb rising inflation.

Another key factor that’s hurting investor sentiment and US businesses, especially the manufacturing sector, is America’s ongoing trade war with other countries initiated by Trump. For example, auto companies such as Ford (F), Tesla (TSLA), Harley-Davidson (HOG), and General Motors (GM) have already warned investors about the negative impact of steep tariffs on their businesses. Metal tariffs inflated automakers’ (XLY) raw material costs in the second quarter. In addition, they’re also losing competitiveness in an already highly competitive market like China due to steep retaliatory tariffs imposed by China on imported vehicles from the US.

As of October 23, automakers such as Ford, GM, HOG, and Fiat Chrysler (FCAU) have lost about 7.1%, 4.6%, 16.4%, and 5.3% month-to-date, respectively. In contrast, Tesla was trading with 11.1% gains, primarily due to analysts’ high expectations from its third-quarter earnings that drove its stock higher on October 23. Thus, investors might continue to suffer until serious efforts are made to resolve trade tensions.


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