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President Donald Trump, who published a message from a golf course in Florida on Friday, renewed his call to reduce the interest rate in the field of federal reserves amid the worst sale of shares for two days in Wall Street since the global epidemic.
Federal Reserve Chairman Jerome Powell, who was indirectly responding from the economic event stage in the outskirts of Washington, said that he and his colleagues “have no hurry” to change the path.
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Various views, and the design of the Chairman of the Board of Directors in focusing on providing price stability and full employment, indicates that anyone betting on the so -called disappointment.
“Although uncertainty is still high, it has now become clear that the customs tariff increases will be much greater than expected,” said Powell. “The same is likely to be true in economic effects, which will include higher inflation and slower growth.”
The shares are deep in the midst of the largest sale in five years, with trillion dollars from the lost market value, the risk of recession, and anxiety over the ghost of recession in the world’s largest economy crawling.
Investors generally search for a form of support during the continuous or uncontrolled market drops, and recently, the Federal Reserve provided this assistance in the form of coordinated bank rescue operations and liquidity lines and in some cases, low interest rates.
Trump’s Global Trefl Gambit renewed hopes for this matter called the Federal Reserve, whose name derives from products in the options market that protects investors from negative risks.
Proof of federal funds suggests that markets are betting on price reduction in May, with no less than four other discounts over the quarter in the next eight months, which will reach the standard lending rate of the Central Bank to 3 %.
I think these hopes are likely to be intermittent.
A long and bad trade war for everyone
The lengthy trade war, which you put in playing on Friday in the form of a retaliatory tariff from China, will be unambiguously bad for both US economies and the world.
The American economy, which was already fluctuating from Trump’s tariff threats during the first quarter, has now been prepared for stagnation, according to the experts of predictors in Wall Street, with the slowdown of consumption, exports and freezing investment in business.
At the same time, high prices are expected to pay consumers as a result of the customs tariff system, which may reach about $ 1,000 per family with lower entry in the country, to inflation.
Related: Trump’s tariff raises our stagnation and subscription structures
In fact, the high prices are likely to be higher than the Federal Reserve to slow down – the central bank tends to focus on inflation pressure on the weak labor market in its twin mandate – the FBI’s reaction is likely to be trained in what investors already express in the stock market.
In the midst of the wide tariff discussion, corporate profits predictions are beaten, with growth estimates in the first quarter of the S&P 500 to about 10.6 %, and they are likely to be less than the pace of 17.1 % registered on the fourth quarter 2024.
The profits need to grow. But they cannot.
The direction of the stock market will be largely dictated due to the growth of profits. The prices of individual stocks as well as standard indexes mainly reflect what investors want to push now in exchange for the profits that have been created over the next 12 months.
Companies can grow profits unless the economy is expanding. They can only expand their profit margins if they are able to transport price increases, linked to the new tariff matrix, for American consumers.
Related: Goldman Sachs S&P 500, targeting GDP as a Trump tariff base
If that Do It happens, the pressure of inflation is likely to accelerate beyond the 2 % preferred federal reserve goal, which makes the short -term interest rate cuts, if not impossible, to justify them.
On the other hand, if companies are not able to transfer the effects of customs tariffs, you will see narrow profit margins and grow them in slow profits. Although this may require some inflation from the local economy and enhance the issue of the FBI price discounts, it will not compel investors to pay higher prices for American shares.
More economic analysis:
- The price of gold hit the stumbling block. Where do you go from here?
- 7 fast food from the notes of the Federal Reserve Chairman Jerome Powell
- Retail sales add new complications to the expectations of reducing federal reserves
In other words, the Federal Reserve will be prevented from cutting as a result of high inflation rates or lowering local growth rates.
American stocks are unlikely, which are already traded in historically high complications. It is much more expensive than its European peers, as indexes depend on the huge technology and the wonderful 7 shares, which decreased earlier this week to the land market lands (at least 20 % of the last highlands).
Bank of America from the strategists, led by Michael Hartnett, says the recession can withdraw the S&P 500 to 4800 points, a 7 % decrease from the current levels. But they argue with the proof of “All in” after that in the event of a decrease in Trump’s approval classification to retreat from the customs tariff policy.
Harttente describes this step as “Trump is a situation.”
I think this is more likely, more effective, more than any supportive procedure from the Federal Reserve.
