Breaking News
LAST CHANCE for Cyber Monday SALE: Up to 54% off InvestingPro! Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Fed's Powell vs. Trump: who's got a 'feel' for markets now?

EconomyAug 23, 2019 06:11PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

By Ann Saphir and Trevor Hunnicutt

JACKSON HOLE, Wyo. (Reuters) - Donald Trump once accused the Federal Reserve of not having a "feel" for the market and compared Federal Reserve Chair Jerome Powell to a golfer who can't putt, but on Friday it was the U.S. president that drove markets into the rough.

Investors had anxiously awaited Powell's speech on Friday, but his continued pledge to "act as appropriate" to sustain the U.S. economic expansion generated only tepid financial market reaction.

Instead, it was Trump who threw markets for a loop, sending the Dow down more than 600 points after he said he was ordering Americans to look for alternatives to doing business in China. After U.S. stock markets closed, Trump responded to new Chinese tariffs on U.S. imports with another increase in U.S. tariffs on Chinese goods.

Powell has been under the intense glare of markets for months, accused of a few communications missteps as the Fed shifted from raising rates last year, to pausing and, last month, to cutting rates for the first time in more than a decade.

Still, until recently, the Fed's communications were rated consistently better under Powell than under predecessors Ben Bernanke and Janet Yellen by banks that trade directly with the central bank. That's based on their responses to regular surveys by the New York Fed, shared with Fed officials before their regular meetings.

The latest survey, released this week, showed those traders sharply docked the Fed's grades last month for what they viewed as inconsistent and confusing messaging ahead of the Fed's first rate cut in more than a decade.

For a graphic, please see https://fingfx.thomsonreuters.com/gfx/editorcharts/USA-FED-REPORTCARD/0H001PBPY5V1/index.html

Powell's speech https://www.federalreserve.gov/newsevents/speech/powell20190823a.htm at the annual Fed retreat in Jackson Hole, Wyoming, a methodical walk through Fed history and its successes and failures, caused less confusion.

"The headlines seem consistent with a central banker attentive to the risk and prepared to do more to support the expansion and do whatever it takes to underwrite a continuing recovery," said Richard Franulovich, head of currency strategy at Westpac. "I don't think that's particularly new or innovative."

Trump, by contrast, was blunt in his call for Fed policymakers to work with him in his efforts to wring a better trade deal from China's Xi Jinping, asking whether Powell or Xi were "our" bigger enemy.

"It is incredible that they (Fed officials) can 'speak' without knowing or asking what I am doing, which will be announced shortly," Trump said before telling U.S. companies they are "ordered" to find alternatives to doing business in China.

"This is a clear sign of an escalation of a trade war," said Subadra Rajappa, head of U.S. rates strategy at Societe Generale (PA:SOGN) in New York. "That's really what the market's responding to."

Of course, Powell is not out of the woods, with a tough communications challenge ahead. The trade war has made the outlook for the U.S. economy increasingly spotty. And bond markets point to an increasingly dire outlook for U.S. growth and inflation.

Powell also will have to coherently explain the policies of a rate-setting committee divided between those who want to cut rates aggressively now and those who want to wait for more evidence of a recession.

Still, it was Trump's day to be in the market's unforgiving glare. And the U.S. president, who has in turns dismissed or downplayed the costs of a trade war with China, sounded amused that the market selloff was being attributed to his policies.

On Twitter, he said that the Dow's decline might be due to U.S. Representative Seth Moulton, "whoever that may be," dropping a long-shot bid for the 2020 Democratic presidential nomination on the same day.

Fed's Powell vs. Trump: who's got a 'feel' for markets now?
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Sam Nardi
Sam Nardi Aug 24, 2019 2:02PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
To Kevin McCarthy, if that’s your assessment of the recent market activity, I think you need to go back to the educational institutions you attended and demand you money back. The recent downturn is entirely attributable to President “Cheeto” (Trump).Interest rates are affected more by market forces e.g. the already inverted yield curve and the very low 10 year bond rates.  If the Fed drops rates now in this greatest economy on the planet according to you know who, what will they do when the real recession arrives?
Kevin McCarthy
Kevin McCarthy Aug 23, 2019 6:53PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
one might say this all started last year when our beloved FED decided to raise rates at the onset of a trade war. Then tried to play dumb, and act like they didn't know what Trade war can do to markets. imagine if Powell and the FED had bothered to "accommodate" before they threw a wrench in the engine.
Kevin Avila
Kevin Avila Aug 23, 2019 6:19PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Lets just have an actual war with China... might as well. Then it wont be an issue anymore.
Ken Loo
Ken Loo Aug 23, 2019 6:19PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
US will loss 100%
Timothy Yap
Timothy Yap Aug 23, 2019 6:19PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
'' War is young men dying and old men talking''Franklin D. Roosevelt
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email