New York: A bruising stock selloff on Monday wiped out more than 650 points from the Dow Jones Industrial Average as US president Donald Trump, fighting like a cornered badger against bad news all around, lashed out at his Federal Reserve chairman and the US stock market careened to its worst showing since April 2017. On Christmas Eve Monday, the political turmoil in Washington DC hit the already jittery financial markets and dragged it all the way to the edge of a bear market. Watching market news nonstop from the White House Trump trained his Twitter ammunition on Federal Reserve chairman Jerome Powell, blasting him for the bloodbath, painting all that’s wrong with the markets as the work of wimps and losers - Trump’s pet distraction and annihilation tactic for a long time. The market is reeling from its worst week since the 2008 financial crisis as investors continued to weigh the impact of rising interest rates, slowing U.S. growth and the a government shutdown dragging into January.
Today I convened individual calls with the CEOs of the nation's six largest banks. See attached statement. pic.twitter.com/YzuSamMyeT
— Steven Mnuchin (@stevenmnuchin1) December 23, 2018
“The only problem our economy has is the Fed,” Trump declared, hours after he forced a stunning spiral of manufactured chaos to lead to a government shutdown which put 800,000 government workers either on a furlough or option of working without pay.
Trump's tweetstorm began after Treasury Secretary Steven Mnuchin called a "Plunge Protection team" meeting with financial regulators, who reportedly said that all is well with the markets. Despite Mnuchin's efforts to soothe the markets, his words had the exact opposite effect. Consider this now: If there's no crisis and the US Treasury Secretary's frantic attempts to calm the market just led to a selloff, what would happen when there is a crisis.
A Prudential Financial analyst told Wall Street Journal why Trump acolytes are unable to stem the bloodletting: "We’ve gone through situations before where it’s absolutely normal for the secretary of Treasury to reach out to the private sector. But what’s bad is this made the papers, and says the government is very worried. It’s almost as if gravity is pulling this market toward a lower level before it bottoms out.”
"Despite howls of protest from market participants and rumored threats from an unhinged US president, the Federal Reserve should be congratulated for its commitment to normalizing interest rates. There is simply no other way to break the US economy's 20-year dependence on asset bubbles", writes Stephen Roach, former Chairman of Morgan Stanley Asia and the firm's chief economist, in Project Syndicate.
Trump’s wrecking ball approach to trade conflicts, tariffs and wild negotiation tactics which nobody can ever trust has deepened uncertainty about US economic outlook. Trump’s legal woes are exploding, the interest rate is steadily ticking up, the markets have been pricing it in for sometime now. Trump, for his part, knows that his theatrics won't get much play after Democrats take control of the House in January and begin wading deep into investigation on Trump dirt. With Trump's tantrums crossing over from conspiracy theories to actually holding government employees to ransom, the Opposition has also decided to turn the knives in at the first opportunity come January.
Like sharks drawn to blood in the water, the Democratic field for the 2020 election looks like the biggest since Watergate after the party's best showing in the midterms after Watergate. All this is leading to just the kind of news cycle that Trump positively hates. Now that the reality of the midterm election loss and his shrinking base is sinking in, Donald Trump’s presidency is much more than ever before about foisting his extremist policy agenda against the will of the Average Joe. "Trump’s rising frustrations could push him over the edge psychologically, with potentially harrowing consequences for American democracy and the world", Jeffrey Sachs warned in November. All those prophecies are coming true now.
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Updated Date: Dec 25, 2018 10:03:16 IST