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Wells Fargo Expert Sees Zero Chance Of Fed Reacting To Trump Remarks

Wells Fargo Expert Sees Zero Chance Of Fed Reacting To Trump Remarks

President Donald Trump's criticism of the "loco" Federal Reserve will likely have "zero impact" on future policies, according to Michael Schumacher, head of interest rate strategy at Wells Fargo & Co (NYSE: WFC). 

What Happened

Trump described the Fed's interest rate hike policies as "out of control" and "loco."

But no matter what terms the president uses, the central bank won't be deterred as at the end of the day stocks "are really not down very much," Schumacher told CNBC in an interview last week.

While a 3-percent sell off in major indices is certainly a "big deal," the kind of declines in stocks needed to alter the Fed's policies would be in the 10-15-percent range, the Wells Fargo strategist said. 

Concerns about higher interest rates have "shaken investors" who are "a little bit more worried about prospects down the road," Schumacher said. At the same time, corporate America is "more concerned" today than it was just a few months ago, he said. 

Cramer: The Fed Is Making A Mistake

Expectations for three interest rate hikes in 2019 will result in a "fatal cocktail" of slower economic growth, an appreciation in the U.S. dollar and people simply feeling "less wealth," CNBC's Jim Cramer said during his daily "Mad Money" show Friday.

Even if the Fed's actions aren't followed by a recession, a GDP slowdown to 2 percent will "hurt a lot of stocks," the CNBC host said. 

The Federal Reserve would not only be guilty of making a mistake with multiple rate hikes, it would be guilty of making the same mistake in made 11 years ago during the 2007-2008 financial crisis, Cramer said. At that time, the Federal Reserve "decided to stop doing their homework" and only looked at financial headlines, which highlighted an overheated housing market — and decided to raise rates.  

Today's Federal Reserve under Jay Powell should be looking at recent weaker economic data, including a 0.1-percent increase in consumer prices in September, and conclude it isn't an "aberration" due to the most recent interest rate hike in September, Cramer said. 

"Now, Jerome Powell doesn't even seem interested in knowing the data," he said. "He's got that preferred narrative. He's sticking with it."

If many companies feel the need to lower their guidance due to the Fed's "ill-advised current course" ahead of earnings season, then investors can expect to greeted with "suboptimal" guidance revisions for 2019, Cramer said. 

Related Links:

Inflation: What It Is, Where It Comes From And How To Protect Your Portfolio From It

What Is The 'Fed Put' — And Is It Still In Place?

White House photo by Joyce N. Boghosian. 


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