As anticipated, the data-fueled Federal Reserve raised interest rates by another 25 basis points on Wednesday to make it a fourth and final rate hike to end 2018. Many market mavens decried the move, including former hedge fund manager and CNBC’s “Mad Money” host Jim Cramer.
Analysts have been citing rising interest rates as one of the causes for the latest declines in U.S. equities. Of course, the rate hike comes much to U.S. President Donald Trump’s chagrin, but Cramer’s stance on rate hikes mirrors that of the president.
“The president is spot on,” Cramer said. “The Fed is perfectly happy to gradually strangle the economy, the U.S. economy, in order to stamp out inflation, or the potential of inflation. And that’s bad news for corporate earnings.”
The Fed proceeded with their rate-hiking policy despite the latest rumblings in the stock markets. The Dow Jones Industrial Average has lost over 3 percent year-to-date, while the S&P 500 has lost 3.79 percent with further declines on Thursday.
Meanwhile, the tech-heavy Nasdaq Composite has lost close to 14 percent within the last three months of what’s been a volatile market. The Dow and S&P were not immune to the market fluctuations with 9.37 percent and 11.57 percent lost, respectively, in the last three months.
Fed Ignores President
Just two days ahead of Wednesday’s announcement, President Trump was already lambasting the Federal Reserve. As has been the norm whenever denigrating the central bank, President Trump took to Twitter to sound off on the economy.
This time, the president cited a strong dollar and inflation as reasons to curb further rate hikes.
It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!
— Donald J. Trump (@realDonaldTrump) December 17, 2018
Rate hikes have been anathema to President Trump, and with the stock markets in the red as of late even after a historic bull run that saw companies like Apple and Amazon cross $1 trillion in market capitalization, the president has been quick to deride the Fed whenever the markets react negatively.
Since taking office, President Trump has been flicking jabs at Fed Chair Jerome Powell for raising interest rates–the same man he nominated for the position. Since January 2017 when President Trump took office, the Federal Reserve has now hiked interest rates seven times versus just once during former president Barack Obama’s tenure.
“If I were running Trump’s re-election campaign, Jay Powell would be my worst nightmare,” said Cramer.
“They must have no sense or empathy for what’s about to happen to the working person in this country,” Cramer added.
For more market trends, visit ETF Trends.