Trump calls stock sell-off 'a correction,' says Federal Reserve is 'crazy'

Businessman looking down at a red 3D arrow chasing through concrete depicting financial losses

The stock market took a massive dive today – here’s how Trump explained what happened

"Markets are not efficient and markets move in both directions and at times they overshoot in both directions", Mnuchin said early yesterday in an interview on the sidelines of the International Monetary Fund annual meetings in Bali, Indonesia. As I wrote this on Thursday, the market was down another $200 billion, by my estimate.

In short, it's hard to see in Powell's speech many signs the Fed is poised to deviate from its steady course toward normalization so as to crush inflation at any sign of labour market tightening or rising wages. "We don't let other things distract us".

I think what they're doing is wrong. I wandered through the neighborhood in which I live, enjoying the weather and treating myself to an iced coffee rather than staying home to watch CNBC, be enslaved by my computer and twitch. He also expects the Fed to overshoot its 2% inflation target by "a bit" but added, "I don't see any signs of greater inflationary pressures on the horizon". As opposed to reacting. And on Thursday, he doubled down on his attacks, saying Chairman Jerome Powell is being too stringent with monetary policy and is making a mistake.

The gradually rising rates, Fed officials say, are meant to guard against any quick run-up in inflation, while remaining low enough so far for the recovery and a strong run of job growth to continue. When a bond is paying more in interest, investors aren't as willing to pay high prices for stocks, which are riskier investments.

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Bonds getting issued today are paying investors more handsomely than those issued a year ago. It is not a solicitation to make any exchange in commodities, securities or other financial instruments.

In addition, the looming increase in the federal budget deficit will require the Treasury to increase the amount of money it borrows.

Since then, longer-term rates have risen faster than shorter-term ones. But that's not right. The Fed's main interest rate, the federal funds rate, now stands between 2 and 2.25 per cent. Since the rate hikes began in late-2015, the S&P 500 has gained about 40%, suggesting this might well be another brief volatility episode. "So you can say that well that's a lot of safety actually, and it is a lot of safety, and it gives you a lot of margins, but I think the Fed has gone insane".

Why? Because higher short rates imply lower inflation. And higher rates down the road would make stocks look even more like bonds' ugly brother.

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This makes Trump's statements about the Fed on Wednesday totally absurd.

"Actually it's a correction that we've been waiting for for a long time, but I really disagree with what the Fed is doing", Trump told reporters before a political rally in Pennsylvania.

"I'd rather pay down debt or do other things, create more jobs, so I'm anxious about the fact that they seem to like raising interest rates". And as a result, for reasons I won't go into here, the stock market would be lower than it is. I don't know what their problem is. The Fed is in business to do what it thinks is right, not necessarily what the people in power want it to do.

"I wonder today whether Trump really has some buyer's remorse with respect to selecting Powell as his Fed chairman, because that was a unusual pick", Moore said.

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Trump has taken a number of steps this year to further juice the economy, including boosting federal spending.

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