It looks like another manic Monday with futures indicating a down opening, maybe to the tune of a couple hundred Dow points.
But this Monday doesn’t have to be a replay of last Monday’s more than 700-point plunge, though it could be.
But I doubt it…
As volatile and ugly as last week was, especially Monday’s plunge on the heels of the previous week’s hard sell-down, the Dow ended last week down only 197 points.
The Dow’s only down 4% from its all-time high of 27,398 registered less than a month ago.
Year to date the Industrials are up a very handsome 12.69%.
And, though the Nasdaq Composite ended last Friday down the worst of major benchmarks, it was only off 44.93 points on the week.
The Nasdaq, only off 4.5% from its July all-time highs, is up a whopping 19.95% year to date.
That’s why I say, “Don’t Cry for the Stock Market.”
At least, not just yet….
President Trump just forced the Fed’s hand by calling out China as a currency manipulator.
What the President couldn’t do by publicly ripping the Fed via Tweets for raising rates and demanding to lower them, he accomplished by a more acceptable, and politically brilliant maneuver.
Calling out China for lowering the value of its currency to make its exports cheaper as it struggles with U.S. tariffs and slowing economic growth draws attention to how the value of the U.S. dollar rises against currencies that are manipulated lower, making U.S. exports more expensive, imports cheaper, inflation lower, and U.S. multinational companies’ overseas earnings weaker when they are translated back into more expensive dollars.
To offset a strengthening dollar and its negative implications the Fed can and will lower rates to at least match other central banks lowering their benchmark rates.
President Trump just guaranteed that, and at the same time gave the Fed cover to sell the public on it lowering rates again come September, on account of potentially negative economic implications stemming from the ongoing trade war with China.
They won’t say they’re lowering because the President forced their hand, or because they want to soften up the dollar. They’re too independent to admit they’ve been played.
But central banks are kowtowing to politicians, like never before, and it’s going to end badly.
Here’s why central bank independence is a joke, how politicians are forcing them to keep manipulating rates lower, and what it means for the future of markets…