The year started with President Donald Trump promising big growth for stocks.
In January, he shared excitement over a “big day” on Wall Street. By June, the president was tweeting: “Stock Market up almost 40% since the Election.” When the market hit a record high on Aug. 25, Trump tweeted, “Congratulations U.S.A.!” And there was more excitement on Oct. 3: “The Stock Market just reached an All-Time High during my Administration for the 102nd Time, a presidential record, by far, for less than two years.”
Now, as those gains are wiped away, the president is attacking the Federal Reserve for the stock market’s woes — and those tweets are pushing share prices even lower.
On Monday, stocks slid an additional 2 to 3 percent after another Trump tweet-attack on the Fed and an effort by his Treasury secretary to calm investors’ fears that only seemed to make matters worse.
The market is now on track for its worst year since 2008 and its worst December since 1931, during the depths of the Great Depression.
The market has been roiled for most of the month over concerns about a slowing global economy, the escalating trade dispute with China and another interest rate increase by the Federal Reserve.
The past two trading days, however, have been dominated by something else: major losses following tweets from the president criticizing Fed Chairman Jerome Powell and the central bank.
Trump’s Monday morning tweet heightened fears about the economy being destabilized by a president who wants control over the Fed.
“The only problem our economy has is the Fed,” the president tweeted. “They don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders. The Fed is like a powerful golfer who can’t score because he has no touch — he can’t putt!”
Peter Conti-Brown, a financial historian at the Wharton School of the University of Pennsylvania, said: “We’ve never seen anything like this full-blown and full-frontal assault. This is a disaster for the Fed, a disaster for the president and a disaster for the economy.”
Treasury Secretary Steven Mnuchin made a round of calls to the heads of the nation’s six largest banks Sunday and said they assured him they have ample money to finance their normal operations. It was an attempt to calm jitters, but it only raised new concerns about the economy.
Most economists expect growth to slow in 2019, not slide into a full-blown recession. In fact, many economic barometers still look encouraging. Unemployment is at 3.7 percent, the lowest since 1969. Inflation is tame. Pay growth has picked up. Consumers boosted their spending this holiday season.
Fed board members are nominated by the president, but they’ve historically made decisions independent of the White House. Trump nominated Powell last year to become chairman.
But the president has voiced his anger over the Fed’s decision to raise its key short-term rate four times in 2018. Those measures are intended to prevent the economy from overheating.
Trump’s latest remarks only created more uncertainty for already unnerved investors who have seen all of this year’s stock market gains evaporate.
“Now we’re having a correction and we’re down for the year, so the narrative people get drawn to is that perhaps his more unpredictable policies are bad for the market,” said Craig Birk, chief investment officer at Personal Capital. “The separation between the president and the Fed, maybe just causes a little more concern than it would have a few months ago.”
By: ALEX VEIGA I Associated Press