The Dow Jones Industrial Average was down 653.17 points when the New York exchange closed at noon today. The S&P 500 had its worst Christmas Eve trading day ever, losing 2.7 percent of its value. Both indexes are officially in bear mode. Merry Christmas!
Analysts blamed the broad market decline on the Trump administration. Now presiding over a government shutdown, the president has begun attacking his handpicked Fed chairman Jerome Powell in a flailing attempt to shift blame for his rolling disaster of a government.
The only problem our economy has is the Fed. They don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders. The Fed is like a powerful golfer who can’t score because he has no touch – he can’t putt!
— Donald J. Trump (@realDonaldTrump) December 24, 2018
True to form, Trump’s tweet was no help to Steve Mnuchin, undercutting his already-flailing efforts to calm everyone down and forestall further stock sliding after reports that Trump wanted to fire the Fed chair had roiled markets. (Presidents do not actually have the power to fire Fed chairs.)
Vacationing in Mexico yesterday, the Secretary of the Treasury “spent the day calling bank executives to reassure them that the markets were functioning properly” and promised to “convene a conference call with America’s top regulators” today. Rather than reassure Wall Street, however, Mnuchin seems to have fed the panic.
The Treasury said in a statement on Sunday evening that the call with the group, known as the President’s Working Group on Financial Market, would be to “discuss coordination efforts to assure normal market operations.”
>Discussions with banks and regulators are common, but Mr. Mnuchin’s decision to announce the call, which was meant to reassure the markets, appeared to create anxiety about the state of the global financial system.
“It signaled a sense of panic and anxiety that didn’t need to be there,” said Brian Gardner, an analyst at the investment banking firm Keefe, Bruyette & Woods. “My first reaction when I heard it was what has happened over the last couple of days that the market does not understand or realize. Is there something that Treasury knows that the rest of us don’t?”
CNN reports that the bankers were mystified, which makes you wonder what sort of rumors were flashing around the traders’ consoles this morning.
The major bank CEOs who spoke by phone with Mnuchin were “totally baffled” by the session, according to a person familiar with the call.
“It was totally out of left field and an odd thing to do,” the person said, describing the timing of the call — on a Sunday before markets opened — as strange. All were taken aback by the public nature of Mnuchin’s tweet.
With all the “adults in the room” having left his administration, Donald is free to do as much creative destruction as he wants, and no one — least of all Mnuchin — can fix what is broken in the man. The best he can do is pretend to now what to do:
The last time the “Plunge Protection Team” was convened was in 2009 — during the financial crisis. There was a financial crisis already *underway.* We are not in the midst of a financial crisis. The stock market is convulsing. Mnuchin is an amateur. https://t.co/x0HhXjZMfr
— Tim O’Brien (@TimOBrien) December 24, 2018
Mnuchin’s reassurance that big banks have “liquidity” is irrelevant to the larger problem that his boss is steering the country into the ground. You can understand why investors would distrust him and despair for the future. After all, if anyone is likely to get fired in the event of a recession, it is Mnuchin.
The S&P 500 has now dipped to 2350, a decline of 14.8% from where it opened at the start of December. If that holds, it will be the worst December for the S&P 500 ever—even worse than 1931.
— Brian Klaas (@brianklaas) December 24, 2018
Featured image via public domain