For Fed, sell-off could point to fading Trump stimulus
October 25, 2018 1:01 pmVideo
Latest News
- EUR/USD: trading plan for the US session on May 3rd (analysis of morning deals). US data will be the key moment of the week May 3, 2024
- USD/JPY: Simple trading tips for novice traders for May 3rd (US session) May 3, 2024
- GBP/USD: Simple trading tips for novice traders for May 3rd (US session) May 3, 2024
- Video market update for May 03, 2024 May 3, 2024
- EUR/USD: Simple trading tips for novice traders on May 3rd (US session) May 3, 2024
- Could the BoE adopt a more dovish stance on Thursday? – Preview May 3, 2024
- EUR/USD. May 3rd. Bulls don’t give up without a fight May 3, 2024
- GBP/USD. May 3rd. Bears are counting on a strong US labor market May 3, 2024
- Market Comment – Stocks enjoy Fed-induced bounce as dollar slips ahead of NFP May 3, 2024
- Weekly Forex Outlook: 03/05/2024 – BoE and RBA decisions headline a calm week May 3, 2024
- Week Ahead – BoE and RBA decisions headline a calm week May 3, 2024
- USD/JPY: trading tips for beginners for European session on May 3 May 3, 2024
- GBP/USD: trading tips for beginners for European session on May 3 May 3, 2024
- EUR/USD: trading tips for beginners for European session on May 3 May 3, 2024
- Technical Analysis – WTI futures break below 200 day-SMA May 3, 2024
- Hot forecast for EUR/USD on May 3, 2024 May 3, 2024
- Key events on May 3: fundamental analysis for beginners May 3, 2024
- Trading plan for GBP/USD on May 3. Simple tips for beginners May 3, 2024
- Trading plan for EUR/USD on May 3. Simple tips for beginners May 3, 2024
- Forecast for EUR/USD on May 3, 2024 May 3, 2024
A three-week stock market sell-off may signal concerns that the massive stimulus from U.S. tax cuts and government spending will fade sooner than expected, a central issue for the Federal Reserve as it considers when to halt interest rate hikes. For now, a more than 7 percent fall this month in the S&P 500 index, which on Tuesday tumbled to July levels, is unlikely to derail plans for more U.S. monetary tightening in December, according to Fed policymakers.
Yet the sell-off, propelled by worries over rising tariffs and earnings of U.S. companies doing business in China, could begin to convince the Fed to scale back plans to continue rate rises next year and even in 2020. More selling in the weeks and months ahead could begin to split what is currently a remarkably unified central bank between policymakers more and less willing to heed a warning from investors: that the hot U.S. economy cannot withstand the combination of trade-related knocks to global growth, rising prices and higher borrowing costs.
The economy expanded at an annualized 4.2 percent rate, more than twice its potential, in the second quarter as President Donald Trump’s signature fiscal stimulus of $1.8 trillion in tax cuts took hold. Since then it has likely cooled a bit but the Fed expects it to grow a still-robust 2.5 percent next year, when policymakers predict the beginning of a smooth return to more normal economic growth.
Goldman Sachs economists estimated the half percentage-point boost to economic growth from higher stocks earlier this year disappeared in October. A further 10 percent market drop would add to the drag and, coupled with “waning” fiscal support, could push growth below the economy’s potential of about 2 percent next year, the bank said. Before March, when the first of the recent tariffs were announced on Chinese goods, the 23 U.S. companies most exposed to China had easily outperformed peers in the S&P index. But since then fortunes have sharply reversed and they have lagged peers by nearly 15 percent, according to Fathom Consulting.
Related Posts: