Dow Jones has lost all of it’s gains of 2018 spooked by FED’s pace of rate hikes and tone of FOMC. US growth is looking healthy, unemployment at a multiyear low and treasury yields are moving higher – since when is good news for the economy is bad news for the street? Did we all fall into a bad habit of easy money and lazy survival? Will another 1-1.25% increase in interest rate over the next 15-18 months kill the profitability of US corporations?
I don’t have concrete answers for most of this but run up to Halloween seems a bit scary and seems to annoy Uncle Trump, as Powell’s autonomy is raining in Trump’s growth parade. US President almost seems to regret nominating Powell as Fed Chair.
The tremor in Wall Street is not localized or contained. Investors’ risk off sentiment is extending to other geographies and equities are getting sold off. Even crude which ran up recently, is cooling off seeing stock market woes. But that is not giving equities any respite. Come November, there is decision on Iran sanctions, mid-term elections and US-China faceoff (this is only half in jest) in G20 meet that’s scheduled for end of November. Markets are trembling with fear and uncertainty.
Will Trump’s next round of tax cuts and holiday season shopping bring cheer to the street? While equity markets shouldn’t be the (only) barometer of underlying economy, in today’s internet world, even roadside vada pav seller starts his day talking about DJI close that morning. So in reality, equity market is larger than it ought to be and a significant factor when it comes to budgeting holiday (read festive) spend.
Would the upcoming holiday season bring enough cheer? Will Deepavali, Thanksgiving, Christmas and New Year will help the spirit and spend? Bring it on for the show must go on!