Market Overview

Market Bounces Back After Trump Says Economy Is 'Very Strong'

Market Bounces Back After Trump Says Economy Is 'Very Strong'

Stocks have been on shaky ground in the month of August as concerns over a U.S. recession have rising. The White House went on the defensive over the weekend, assuring Americans that the economy is solid.

The Dow Jones Industrial Average plummeted 800 points last Wednesday after the 2-year and 10-year U.S. Treasury yield curve inverted, a historical leading indicator of the past nine U.S. recessions. Trump took the signal seriously, scheduling a conference call with the CEOs of JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corp (NYSE: BAC) and Citigroup Inc (NYSE: C) to reportedly get feedback on the health of the economy and the U.S. consumer.

See Also: Experts: Keep The Yield Curve Inversion In Perspective

Economy Strong

On Sunday, Trump said U.S. economic numbers suggest there is no indication a recession is coming.

“I don’t think we’re having a recession,” Trump said. “We’re doing tremendously well. Our consumers are rich. I gave a tremendous tax cut and they’re loaded up with money.”

Trump’s critics and some supporters have suggested the recent volatility in the markets and potential global economic slowdown is being triggered by Trump’s trade war with China. The U.S. is set to implement a 10% tariff on an additional $300 billion in Chinese imports starting on Sept. 1.

On Sunday, Trump defended the trade war and said he’s concerned more about the long-term outlook that short-term market fluctuations.

“If I wanted to make a bad deal and settle on China, the market would go up. But it wouldn't be the right thing to do," he said.

Flat Versus Inverted

White House trade advisor Peter Navarro said Sunday that the yield curve inversion may be misleading for investors.

“An inverted yield curve requires a big spread between the short and long,” Navarro said.

On Monday, 10-year Treasury notes were yielding 1.594%, while 2-year notes were yielding 1.525%. Navarro said the relatively strong U.S. economy is driving investment dollars into the U.S. bond market and driving down long-term yields.

“It’s a flat curve which is a very weak signal of any possibility,” he said.

Calling Out The Fed

On Monday, Trump once again lashed out at the Federal Reserve and called on it to help support the economy through this period of volatility.

“Our Economy is very strong, despite the horrendous lack of vision by Jay Powell and the Fed, but the Democrats are trying to ‘will’ the Economy to be bad for purposes of the 2020 Election,” Trump tweeted.

“The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well.”

Investors seemed to like the reassurances from the White House on Monday. The SPDR S&P 500 ETF Trust (NYSE: SPY) traded higher by 1.3% and the SPDR Dow Jones Industrial Average ETF (NYSE: DIA) was up 1.1%.

Posted-In: News Bonds Broad U.S. Equity ETFs Politics Global Top Stories Markets ETFs Best of Benzinga


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