The White House has described the recent sell-off of US shares as a “glitch”. It added that once the trade dispute with China is resolved, then stocks would rise again.
It may well be right. But the so-called “glitch” goes beyond America’s quarrel with China….
…. There are concerns over the administration’s unacceptable interference with the Federal Reserve, which is far from trivial. It undermines the independence of the central bank.
There are also worries that the synchronised global growth that we had all been cheering at the start of 2018 is not quite as harmonised any more.
There are concerns that the US government shutdown over funding of the Mexico wall won’t be settled quickly. The difference between the White House and the now Democrat-controlled lower house looks insurmountable.
There are doubts that US corporate earnings growth will not be as robust as expected. The revenue warning from Apple (NASDAQ: AAPL) may not be the only piece of disappointing news that the market will have to cope with in 2019.
And there’s more
There is disquiet that Brexit may be messier than the UK government is willing to admit. Then there are reservations that US inflation – as a result of the hefty import tariffs – could prompt the Fed to hike rate, even though economic growth could be slowing.
There are fears that China’s economic growth is slowing. That could spread to other parts of Asia, and then back to the US.
In fact, there is less urgency on China’s part to concede any ground to the US at the negotiating table. After all, it is the US administration that has chosen to pin its success on the performance of the stock-market index.
If the Dow Jones Industrial Index doesn’t recover, then the administration has, by its own measure, has failed. So much for The Art of the Deal.
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