In the thick of the decade-long bull market that saw the major U.S. indexes reach historic highs, President Trump was quick to praise the latest market upswing as a byproduct of his presidency–mainly the corporate tax cuts that resulted in strong earnings spanning across most sectors. With the most recent volatility, however, the president may be starting to realize that the proverbial stock market party may be ending.
“I think he’s beginning to recognize that there are cracks in the strength of the economy that really came from his tax cuts,” Cramer added. “I think he’s starting to realize that ‘Holy cow, this could go away.'”
Fed Getting Cold Feet
Cramer’s assessment comes as various Fed members might be signaling otherwise, including those by the Fed Chair. Powell exhibited signs of cautiousness as he discussed the economy at a symposium with Dallas Fed President Robert S. Kaplan earlier this month.
“So, you know, a good example is — a noneconomic example would be you’re walking through a room full of furniture and the lights go off. What do you do? You slow down. You stop, probably, and feel your way,” Powell said.
In the meantime, Federal Reserve Bank of New York President John Williams is keen to sticking with hiking rates–somewhat.
“We’ll be likely raising interest rates somewhat but it’s really in the context of a very strong economy,” Williams said at a community event in New York on Monday. “We’re not on a preset course. We’ll adjust how we do monetary policy to do our best to keep this economy going strong with low inflation.”
In an interview with the Wall Street Journal this month, Federal Reserve Bank of Philadelphia President Patrick Harker was outright convinced that a December rate hike is not the most optimal move given the latest rumblings in the markets.
“At this point, I’m not convinced a December rate move is the right move, but I need to watch the data over the next few weeks before determining whether it is prudent to boost the cost of borrowing again.”
Despite the latest comments from his colleagues and recent volatility roiling the capital markets, Clarida shares Goldman Sachs’ view that the economy is still robust.
“U.S. economic fundamentals are robust, as indicated by strong growth in gross domestic product and a job market that has been surprising on the upside for nearly two years,” Clarida said.
For more trends in fixed income, visit the Rising Rates Channel.