Guess Who Trump Blamed for Today’s Sharp Stock Market Reversal

February 11, 2020 7:23 PM UTC
The stock market shot to record highs on Tuesday before suffering a sharp reversal. You can probably guess who Trump blamed for the sell-off.
  • The stock market’s three primary indices all set new intraday records on Tuesday.
  • But a sharp reversal struck as Fed Chair Jerome Powell testified on Capitol Hill.
  • President Trump ripped Powell a new one, blaming him for the stock market sell-off.

The U.S. stock market huffed and puffed to new all-time highs on Tuesday, prompting one of those classic Donald Trump tweets in which the president awkwardly admonishes us to spend our money wisely.

It’s as if Trump thinks we unlock a new tranche of cash every time the Dow Jones Industrial Average passes a new milestone:

Source: Twitter

But that’s not how it works at all…

Not that it matters.

Because shortly after peaking above 29,415 to set a new high-water mark, the Dow tumbled more than 150 points.

The stock market dove from record highs on Tuesday. | Source: Yahoo Finance

The Dow ultimately rallied off its session low, but not back into record territory. And not before a suddenly-irate President Trump stormed back to Twitter.

This time, he was the one doing the huffing and puffing, and he ripped into a familiar punching bag: Jerome Powell.

Source: Twitter

The Federal Reserve chair testified before Congress this morning, and Trump fumed that Powell hadn’t done enough to vindicate the stock market’s bullish appetite.

Trump Rips Powell a New One After Stock Market Slides from Highs

The irony is that Powell sounded remarkably upbeat about the state of the U.S. economy. Here’s how he described it:

“We find the U.S. economy in a very good place, performing well,” he said, although there are “signs of global growth bottoming out.”

That’s about as cheery as Powell gets.

But it wasn’t sanguine enough for Trump. He was probably looking for the Fed chair to sound a bit more like this:

Source: Twitter

To Trump’s point, Powell didn’t sugar-coat the risks that the economy faces as it plods deeper into the longest expansion in history.

He warned about the looming threat of the coronavirus outbreak, whose domestic and global impacts can’t yet be predicted with any degree of precision.

He also warned about the unsustainability of the federal budget deficit, which will likely surpass $1 trillion in 2020.

What was Powell supposed to do? Lie?

If anything, you could argue that he was too optimistic about U.S. growth and the health of the banking system. Regarding the latter, Powell claimed the central bank expects to cease its controversial liquidity injections by mid-year.

Trump Clammors for Rate Cuts Ahead of 2020 Election

Despite trumpeting the economy as the “best in history,” Trump continues to demand that the Fed pump the stock market by driving interest rates even lower – potentially into negative territory.

Rates are already low, and Powell warned Congress that they’re so low that they will make it difficult for the Fed to combat the next economic downturn.

Interest rates remain low by historical standards, even at the tail-end of the U.S. economy’s longest-ever expansion. | Source: Trading Economics

It’s clear that Trump craves a sharp decline in interest rates to juice the stock market ahead of a pivotal presidential election. Future recession be damned.

And for all Powell’s warnings, traders expect that Trump will get his way.

According to the latest data from CME, the futures markets imply another interest rate cut following the Fed’s July meeting. There’s a 45% probability that Trump gets a second one when the FOMC votes in December.

But with the presidential election scheduled for November 3, that December rate cut may come too late.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.

Sam Bourgi edited this article for CCN.com. If you see a breach of our Code of Ethics or find a factual, spelling, or grammar error, please contact us.

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Josiah is the U.S. Editor at CCN.com, where he focuses on financial markets. His work has also been featured on Yahoo Finance and Investing.com. He lives in rural Virginia. Connect with him on LinkedIn or Muck Rack. Email him directly at josiah.wilmoth(at)ccn.com. Josiah Wilmoth is a Trusted Journalist.