There is no wonder the Fed is clueless…
The U.S. economy is slowing. Look at housing sales, auto sales, the Cass Freight Index, the leading economic index, residential construction, freight shipments, retail store closures, large truck orders, bankruptcies, and many more.
Chaos in short-term funding markets this week led the Federal Reserve to step in with a series of overnight rescue operations to help keep credit flowing through the financial system.
So much so that Goldman Sachs expects the Fed to make repo operations permanent…
Official U.S. national debt currently exceeds $22 trillion and increases by almost 9% per year, regardless of which political party mismanages distractions and payoffs.
Do not count on our government and the Fed to be on your side to help you through this challenging time as global growth slows amid the ongoing tariff conflict. Federal Reserve Chairman Jerome Powell just looked America in the eyes and essentially told us that he is not going to help the Average Joe and Average Jane as the U.S.-China trade war drags on month after month.
The Fed’s job isn’t to help you and I or to care about the fallout of the trade war. As far as President Trump is concerned, the Federal Reserve’s only job is to cut bond yields hard and fast. Trump made it crystal clear that he wanted a full-point cut — or even more than that — but Powell completely ignored the President’s demands and only slashed the interest rate by a quarter-point.
I expect a standoff between the Fed and Trump to come to a head…
The stock market swooned in response to this disappointment, and as we would expect, Trump’s rejoinder was swift and caustic: “Jay Powell and the Federal Reserve Fail Again. No ‘guts,’ no sense, no vision! A terrible communicator!” tweeted the President immediately after the rate cut announcement.
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There’s no doubt that interest rates will continue to decline because Trump will persist in applying pressure for more “insurance cuts” in order to prevent an immediate stock market crash. That doesn’t mean that the government can avert a market crash indefinitely, but they’re doing everything they can do to avoid a repeat of the 20% mini bear market we saw in the fourth quarter of 2018.
Friends in the investing community are confused and concerned by the short-term price action in stocks and commodities that took place following the decision of the Fed. See below for what took place this week:
Pretty much everything was going down at the same time, but that’s exactly what I expected. This is normal price action when markets are absorbing major news events like a Fed announcement – not to mention the President calling the Federal Reserve Chairman a “bonehead” and a “terrible communicator.”
The stock, bond, precious metal, and currency markets are trying to analyze, second-guess, and predict each and every word that Powell is saying and what his next moves will be. That causes uncertainly in the markets, and if investors hate anything, it’s uncertainty.
Rest assured that the uncertainty will subside and Trump will get what he wants – ultra-low interest rates like we’re seeing in Germany, Japan, Italy, Denmark, Sweden, and other developed nations around the world – and it’s only a matter of time before bond yields are competitive with other countries that already have zero or negative interest rates.
Hold your gold – if anything, we should be thanking the “bonehead” Fed for giving us a prime opportunity to add to our precious metal holdings and let the government do what it does best: fight amongst themselves, create havoc, and inevitably drive investors to safe havens, like gold.
Chief Editor, CrushTheStreet.com
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