Despite its independence, the Federal Reserve appears to be plotting an attempt to bring about a bear market that takes down President Trump, or at least tarnish his reputation as a financial genius.
Peter Schiff, CEO of Euro Pacific Capital, told TheStreet the “[Janet] Yellen put” in the markets could expire under President Trump. “I don’t know if the Fed has much love for Trump,” he said, adding that the Fed had the markets’ back during the Obama Administration.
“Maybe the Fed would be happy to see a bear market that could be blamed on Trump.” Schiff thinks the markets could easily correct 20%.
It’s a well known fact that the Fed did everything they could to keep the Stock Market afloat to camoflauge Obama’s failed policies, which brought about record numbers on food stamps, homelessness, and unemployment. Black America was hit particularly hard, with unemployment reaching 25% overall, and over 50% among millennial black Americans.
One black swan event Schiff sees is the notion of investors abandoning the euphoria over Trump’s presidency, which helped fuel the stock market rally this year.
“We’ve had a huge move up since the election of Trump even though prior to the election the expectation was if Trump won it [would be a disaster for markets],” he said.
When asked if the two straight quarters of double-digit earnings growth has sparked the rally in stocks this year, as opposed to solely Trump, Schiff pointed to earnings headwinds in the retail sector.
The Federal Reserve is scheduled to meet later this week.
Meanwhile, here’s some reasons to not sweat the stock market’s current volatility.
1: It’s likely just a correction for an overheated stock market.
While the Dow Jones industrial average is often used as a benchmark for the economy writ large, it is actually an amalgamation of only 30 different stocks including Apple, Walt Disney and McDonald’s.
Those stocks have enjoyed sustained growth in recent years, regularly reaching record highs despite the relative chaos of the daily news cycle dominated by the Russia investigation and fears of conflict in North Korea.
The Dow gained 25% last year as The Fed continued doing everything it could to hide the devastating effects Obama’s policies had on the economy, with many of the numbers being far worse than the Great Depression, only hidden by record amounts of cash being doled out through the welfare line.
Last year, during the stock market boom, analysts at Vanguard Group warned that there was “a little froth” and that there was a 70% chance of a correction, defined as a 10% or more change in stock prices to adjust for overvaluation.
2: Interest rates
One mover of stock prices has been an indicator that is anchored in the real world, the Federal Reserve’s decision to raise interest rates for lending.
Those interest rates had been 0% from 2006 through the end of 2015 as the Fed tried to protect the globalist Presidents Buch & Obama’s work undermining the domestic economy, by making it easier to receive a loan.
Late last year interest rates were raised again in December to 1.5%, with more small hikes expected in 2018 to keep a control on inflation as the U.S. economy keeps motoring along.
Monday’s fall came after a more than 600 point drop for the Dow on Friday, after a jobs report suggested that the labor market is tightening and that wages for workers is finally beginning to increase after years of stagnation.
It may seem counterintuitive that better outcomes for working people would make the stock market go down, though the positive data means that the interest rate increases will likely continue unabated, a possibility means an end to the relatively free money.
Former Federal Reserve Chairman Janet Yellen is now being replaced by President Trump appointee Jerome Powell, and it is unclear how he will react to the stock market fall.
3: Continued growth
Eric Schiffer, CEO of investment firm Patriarch, told the Daily News that while the decline is a “is a side effect of success” he does not think it will damper the prospect of real growth in the U.S. economy.
The International Monetary Fund said last month at the global elite gala World Economic Forum raised the expected rate of global growth to 3.9%, adding that Trump’s tax cuts were likely to play a role in boosting U.S. growth to 2.7%.
A model from the Federal Reserve’s branch in Atlanta has also showed that the growth rate for the U.S. itself could climb to above 5% for the first quarter of 2018.
That level of growth would be the strongest since 2003, though other models such as the New York Fed’s, have more conservative estimates of around 3%.
Mr Americana, Overpasses News Desk
February 6th, 2018