Trump on 831 Stock Market Drop: Fed Has Gone Crazy

Trump on 831 Stock Market Drop: Fed Has Gone Crazy

Trump, who has been critical of the central bank's interest rate increases, tells reporters after landing in Erie, Pennsylvania, that he thinks "the Fed is making a mistake".

"I think we don't have to go as fast", Trump said Tuesday on CNBC.

Rising bond yields have been drawing investors out of the stock market, and the best-performing stocks over the past year took some of the biggest losses on Wednesday.

They include the U.S. trade war with China and the potential impact on global growth while rising bond yields have diverted attention from equities - stocks - which have been offering the most attractive returns for years because central bank stimulus had flooded markets with cheap money. President Trump blamed the Federal Reserve - and his appointee Jerome H. Powell - for the big drop Wednesday. Many observers expected that would trigger a sell-off in the stock market as investors flooded their cash into Treasurys.

Bourses in Paris and Frankfurt both lost more than two percent, while London fell 1.3 percent.

The Dow Jones Industrial Average sank 831 points Wednesday, an approximately 3.15 percent drop.

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Higher interest rates tend to moderate economic growth and makes borrowing more expensive for the US government as well as businesses and consumers. The S&P 500 was down 3.3 percent, and the Nasdaq saw losses of 4.1 percent.

The Fed has been raising interest rates gradually since December 2015, and last month lifted its target for short-term rates to a range of 2 per cent to 2.25 per cent, responding to an economy that has been growing at a pace well above what Fed officials believe is sustainable.

Trump's comments echo his previous criticisms of recent months, which broke more than two decades of White House tradition of avoiding comments on monetary policy out of respect for the independence of the US central bank. "I just don't think it's necessary to go as fast".

"The Fed continues to flood the market with United States dollars", he said in one tweet.

Ivan Feinseth, Chief Investment Officer at Tigress Financial Partners, said that although the sell-off caught him off-guard, he thought many investors were unduly frightened by the prospect of rising rates. "But I really disagree with what the Fed is doing".

The sell-off came a day after the International Monetary Fund said the world economy is plateauing and cut its growth forecast for the first time in more than two years, blaming escalating trade tensions and stresses in emerging markets.

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