I thought that the market had moved away from focusing solely on the ‘will they, won’t they’ question about interest rate decisions from the US Federal Reserve. I was wrong.
Some mildly weak economic data, which could indicate a larger cut sooner will be required has been taken as negative (it ought to be positive for equities and bonds) by markets with sell offs so strikingly dramatic at the start of September just like we had at the start of August.
The similarity in the order of events and the timing at the start of the month makes me wonder if there are elements of algorithmic trading, already a big element of market activity, at work.
As there has been no real change in the prospects for the US economy (the future always has a range of outcomes and analysts are supposed to allow for that), I don’t see this sell off as being any more of a change of market direction than the August one.
What horrified me was to see Trump openly asking the Fed not to cut, presumably so that the current Preseident Biden can’t claim that his administration beat inflation, and various senior Democrats saying the Fed should cut. All are simply looking to their political self interests – there is not one jot of economic argument being reported, nor any comments about the interests of the American citizens.
I guess no-one is surprised by anything Trump does now, but the Democats appear to have no more moral fibre to me. US politics now functions in a way that makes Anthony Trollope’s satire on British politics at the end of the 19th century look quite mild (‘The Way We Live Now’).
Some may say it’s not really that different in the UK or Europe, but I would point out that the extent to which UK politicians are supported (and influenced) by the money of sectional interests (and they are on both left and right) is on a rather different scale, miniscule in comparison.
US politics does not obviously and observably have a linear relationship with stock market direction so the idea of the US President directing the policy of the central bank (which it sometimes seems like Trump wants to do) is pretty horrifying. But we live in horrifying times.
