President Donald Trump fired a series of charged comments at the Federal Reserve and China, and of course US equity markets led global indices lower. Typically aggressive outbursts by the President have become commonplace and the backlash by the main stream media has been ramped up to new levels. Note that we referenced an article in the Financial Times attributed to Politi and Smith, July 31, 2019 for this piece.
As a result of the usual rogue comments by Trump, US stocks moved lower and this was the second consecutive day that the US market faded. Mr Trump unleashed his attack just as US and Chinese negotiators sat down for renewed talks on tariffs and trade. Mr Trump suggested that officials in Beijing were not negotiating in good faith and were failing to implement purchases of agricultural products – markets took a hard hit.
Our Views: The Fed is expected to reduce its main interest rate by 25 basis points to a target range of 2 to 2.25 percent. Trump, “I would like to see a large cut, and I would like to see quantitative tightening immediately stopped.” Well there is no question that the US economy will get a boost from a cut, and there could be two 25 bps cuts back-to-back giving the economy support after just reporting Q2 growth at 2.1 percent down from Q1 growth at 3.1%. The economy is slowing.