Trump calls stock sell-off a correction, says Fed ‘crazy’
- Author: Zachary Reyes Oct 14, 2018,
Oct 14, 2018, 9:39
Wednesday evening, lower futures indicated that the Dow Jones would fall even further on Thursday when the exchange opened.
Bourses in Paris and Frankfurt both lost more than two per cent, while London fell 1.3 per cent.
A jump in yields tends to rattle investors, and the S&P 500 dropped 3.3 percent on October 10 for its biggest loss since February - and clinched its first five-day losing streak since 2016. "It's all about investors rethinking their exposure to stocks."Many of the biggest U.S. names fell hard in Wednesday's session, with Apple, Boeing and Facebook all slumping more than four percent and Amazon, Nike and Microsoft shedding more than five percent".
Consider that as rates are higher this year, the USA government estimates it will pay interest of $518.17 billion on its debt in the fiscal year 2018.
I suspect that long-term rates will keep rising, at least for a while. "The dollar is very strong, very powerful and it causes difficulty in doing business".
On the back of historically-low unemployment rates, a humming economy, and a record bull market, the Fed has already hiked interest rates three times this year. It had been anchored at virtually zero for seven years following the 2008 financial crisis.
"I think the Fed is out of control".
US stocks tumbled for a second straight session on Thursday as volatility reigned on Wall Street amid worries about higher interest rates and trade wars. Investors have sold longer-term bonds accordingly. So it's a great time to be a borrower, and a lousy time to be a saver because Fed policy is tightening at a slow and gradual rate.
Borrowing costs are rising for companies, homebuyers and the USA government - all of which could eventually dampen economic growth.
Rates a big part of selloff.
However, higher U.S. interests rates have also helped send emerging market currencies into a tailspin, as countries that borrowed heavily in dollars race to pay back debt.
Overall, the "Bond King" is bearish on bonds, bearish on stocks. "It's all about investors rethinking their exposure to stocks".
But the falls are now spreading beyond technology stocks.
Our historic economic expansion is getting on in years. "When you talk about economies, our economy is far better than that".
Numerous other nations artificially control their currency value, stimulate the movement of money to their domestic companies, and artificially print free money for their people to borrow to stimulate the sale of products and services that they export.
As a result, bond funds have logged losses recently, though generally milder than for stock funds. Consumer price changes are near the Fed's 2 percent target but show no signs of moving higher.
The Fed is not raising rates for economic reasons, the historically counter cyclical post-war rate policy.
Should I panic about rising rates? As the rates rose, there would be a drop-off in demand for loans.
If today's CPI numbers come in ahead of expectations then we can probably expect to hear a lot more from the President Trump about the Fed's rating hiking cycle. - Is inflation about to rise? Economists generally agree that in order to prevent runaway inflation, the Federal Reserve can raise interest rates to restrain the money supply. That would help the case for holding onto stocks.
It is indisputable that the Federal Reserve could, if it so chose, bring the American economy to its knees by drastically increasing interest rates. Over the past year, the Fed has been raising rates once every quarter, or a pace of four times in a year.
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This story was reported by The Associated Press.