Stocks PLUNGE today amid a fear of a Trump induced recession.
Today in Vanity Fair;In response to:
Stocks Nosedive Amid Fears of a Trump-Induced Recession
Markets dropped Wednesday as the president’s trade wars weigh on global economic growth.
By Bess Levin
August 14, 2019
Donald Trump is currently running for reelection on the strength of the economy, which he believes will outweigh all the racism, corruption, cruelty, incompetence, white supremacy, and obstruction of justice. Yet that pitch is going to become a bit more difficult if the president tips the economy into a recession, the odds of which grow stronger each day, and which today’s market sell-off appears to be foreshadowing.
As of noon on Wednesday, the Dow Jones Industrial Average was down a whopping 620 points, or 2.36%. The S&P 500 dropped 2.37%, the Nasdaq Composite declined 2.75% and the Cboe Volatility Index—Wall Street’s fear gauge—spiked to a high of 22. Most alarmingly, the yield on the benchmark 10-year Treasury note fell below the 2-year rate, a bond market phenomenon that historically signals a coming recession. The yield on U.S. 30-year bonds also dropped to an all-time low; the fact that both occurred at the same time indicates investors are concerned and bracing for a slowdown in the U.S. and global economy. “Historically speaking the inversion of that benchmark yield curve measure means that we now must expect a recession anywhere from 6 to 18 months from today which will drastically, and negatively, shift our medium-to-longer term outlook on the broader markets,” Tom Essaye, founder of the Sevens Report, wrote in a note on Wednesday.
While it’s possible investors’ fears are overblown, Arthur Bass, managing director of fixed income financing, futures, and rates at Wedbush Securities, told CNBC he wouldn’t count on it. “I have to yield to the historical evidence and note that the phrase ‘this time is different’ usually doesn’t work,” he said, noting the Trumpian headwinds we’re facing. “It’s a very unusual time period: We haven’t had tariff issues like we’re dealing with currently in about 80 years. It’s about dealing with negative rates in most of the European countries and Japan. Again, I have respect for the inverted yield curve as a signal that recession is ahead.”
Also rattling investors is an apparent recession in Germany, which generates a sizable portion of its GDP from trade, and which may be a bellwether for how Trump’s tariffs are weighing on the global economy.
Wednesday’s sell-off comes a day after Trump (tacitly) admitted that American consumers are paying for his trade war, announcing that he’d delay new tariffs on some Chinese products until December. That unusual flash of sanity made investors happy, but it clearly wasn’t enough, given the expectation that Trump won’t end his trade war before the 2020 election, and that the Federal Reserve may not be able prevent a recession through rate cuts.
Stocks Nosedive Amid Fears of a Trump-Induced Recession
Markets dropped Wednesday as the president’s trade wars weigh on global economic growth.
By Bess Levin
August 14, 2019
Donald Trump is currently running for reelection on the strength of the economy, which he believes will outweigh all the racism, corruption, cruelty, incompetence, white supremacy, and obstruction of justice. Yet that pitch is going to become a bit more difficult if the president tips the economy into a recession, the odds of which grow stronger each day, and which today’s market sell-off appears to be foreshadowing.
As of noon on Wednesday, the Dow Jones Industrial Average was down a whopping 620 points, or 2.36%. The S&P 500 dropped 2.37%, the Nasdaq Composite declined 2.75% and the Cboe Volatility Index—Wall Street’s fear gauge—spiked to a high of 22. Most alarmingly, the yield on the benchmark 10-year Treasury note fell below the 2-year rate, a bond market phenomenon that historically signals a coming recession. The yield on U.S. 30-year bonds also dropped to an all-time low; the fact that both occurred at the same time indicates investors are concerned and bracing for a slowdown in the U.S. and global economy. “Historically speaking the inversion of that benchmark yield curve measure means that we now must expect a recession anywhere from 6 to 18 months from today which will drastically, and negatively, shift our medium-to-longer term outlook on the broader markets,” Tom Essaye, founder of the Sevens Report, wrote in a note on Wednesday.
While it’s possible investors’ fears are overblown, Arthur Bass, managing director of fixed income financing, futures, and rates at Wedbush Securities, told CNBC he wouldn’t count on it. “I have to yield to the historical evidence and note that the phrase ‘this time is different’ usually doesn’t work,” he said, noting the Trumpian headwinds we’re facing. “It’s a very unusual time period: We haven’t had tariff issues like we’re dealing with currently in about 80 years. It’s about dealing with negative rates in most of the European countries and Japan. Again, I have respect for the inverted yield curve as a signal that recession is ahead.”
Also rattling investors is an apparent recession in Germany, which generates a sizable portion of its GDP from trade, and which may be a bellwether for how Trump’s tariffs are weighing on the global economy.
Wednesday’s sell-off comes a day after Trump (tacitly) admitted that American consumers are paying for his trade war, announcing that he’d delay new tariffs on some Chinese products until December. That unusual flash of sanity made investors happy, but it clearly wasn’t enough, given the expectation that Trump won’t end his trade war before the 2020 election, and that the Federal Reserve may not be able prevent a recession through rate cuts.
Trump got a gift inheriting the Obama recovery. However, his ridiculous trade war has driven consumer prices up, while salaries have remained stagnant. This math makes it worse for the average American. Thus, he is screwing up the economy. Investors are beginning to see the failed promises of Trump for what they are. The next president is not likely to inherit a good situation like Trump did. Again, the sooner he is out of office, the safer and better off the country will be.
As an update, the Dow Jones Industrials are currently down 811 points today
Comments (7)
Why the sudden change?
Trump could be forgiven for launching a tariff war with China if this tactic hadn't been tried nearly 100 years ago by another pair of misguided Republicans named Smoot and Hawley which lead to The Great Depression. Unfortunately ignorance of history is no excuse, not when you are the President of the United States. One must conclude that all the people who are advising him are every bit as ignorant as he is. Including Larry Kudlow his economic adviser.
one reason why you have reached "peak Jim "
This guy and the Democrats don't even seem to know what their own position is! It changes every day.
While actions yield reactions, they don't necessarily take place, nor completion,
the same hour, day, week, month, year, or term. The full effect happens over time.
Job markets in the U.S. at least, are still strong. Haven't checked too much out side lately.
That means an up tick could be coming. Or maybe we hit holiday slow downs before new peaks again.
Either way, it only takes a weak-minded person and media to start this drivel again.
Get a grip and understand that markets are volatile ALL of the time no matter what.
Why else would they need categories for "risk" factor?