President Donald Trump again criticized the Federal Reserve for raising interest rates following the worst market sell-off since February.
“The Fed has gone crazy,” he told reporters on Wednesday as he arrived in Pennsylvania for a campaign rally. The central bank “is too tight,” he added.
— CNBC Now (@CNBCnow) October 10, 2018
White House Press Secretary Sarah Sanders said in a statement following the close of markets that the U.S. economy is “incredibly strong” despite the selloff, which analysts attributed in part to trade tensions with China.
“It’s a correction we have been waiting for a long time,” Trump said.
The president frequently celebrates publicly when the stock market reaches new highs, pointing to the gains as affirmation for his economic policies.
Trump was briefed on the market turmoil earlier in the day, a White House official said. He has repeatedly criticized the central bank for raising interest rates this year, decisions aimed at preventing the economy from overheating.
“The fundamentals and future of the U.S. economy remain incredibly strong,” Sanders said in a statement. “President Trump’s economic policies are the reasons for these historic successes and they have created a solid base for continued growth.”
U.S. stocks tumbled Wednesday, the most since February, as fresh concern about the impact of the trade war with China roiled technology and industrial shares. The broad selloff took the S&P 500 to the lowest in three months, the Dow Jones Industrial Average plunged as much as 836 points and the Nasdaq 100 Index tumbled more than 4 percent for its worst day in seven years.
The selloff came a day after the International Monetary Fund said the world economy is plateauing and cut its growth forecast for the first time in more than two years, blaming escalating trade tensions and stresses in emerging markets.
Trump has slapped tariffs on $250 billion in Chinese goods this year, and Beijing has retaliated with levies of $110 billion of American products. The IMF projections don’t take into account Trump’s threat to expand the tariffs to effectively all of the more than $500 billion in goods the U.S. bought from China last year.
Fast forward just 1 week when things are decidedly less glowing, and on a day in which the VIX exploded, the Nasdaq tumbled 4%, the S&P slumped below all key support levels, and the Dow plunged more than 800 points, its worst day since February in a Black Wednesday for tech stocks, there is far less cause for celebration.
In fact, according to CNBC’s Eamon Javers, Trump was briefed on the market sell off this afternoon. And while Trump will most likely not tweet any celebratory message today, a senior White House official give Javers the following comment: “This is a bull market correction. It’s probably healthy. This will pass and the US economy remains strong.”
President Trump has been briefed on the market sell off this afternoon. A senior White House official gives me this comment now: “This is a bull market correction. It’s probably healthy. This will pass and the US economy remains strong.”
— Eamon Javers (@EamonJavers) October 10, 2018
So who was behind the selloff: deleveraging risk parity funds? Selling CTAs? A wholesale derisking into a higher interest rate environment. Or… could it be China, with its $1.5 trillion in reserves sending Trump a clear message what could happen if Trump continues to unleash hell in Beijing’s general direction?
While it is unlikely that the culprit will be revealed, there is nothing that would prevent Trump from pushing the former narrative and blaming Beijing for today’s rout.
That said, there is one more person who should be rather nervous after the plunge: recall that exactly 24 hours ago Trump said that he doesn’t “like what the Fed is doing.” What better justification could Trump have to “push” Powell than to accuse him of the second worst selloff of 2018?
Indeed, as one notable fintwit member said, a little more downside in the S&P, “and Powell can start putting his coffee cups and pencils in a cardboard box.”
Another 2% down in spoos and Powell can start putting his coffee cups and pencils in a cardboard box
— Not Jim Cramer (@Not_Jim_Cramer) October 10, 2018