{"id":47363,"date":"2018-07-25T07:00:55","date_gmt":"2018-07-25T11:00:55","guid":{"rendered":"https:\/\/www.ino.com\/blog\/?p=47363"},"modified":"2018-07-24T15:58:28","modified_gmt":"2018-07-24T19:58:28","slug":"should-fed-be-above-criticism","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2018\/07\/should-fed-be-above-criticism\/","title":{"rendered":"Should The Fed Be Above Criticism?"},"content":{"rendered":"<p>I suppose it was just a matter of time, but Trump Derangement Syndrome (TDS) finally hit the bond market last week.<\/p>\n<p>According to some experts, last week\u2019s nearly 10 basis point jump in long-term Treasury bond yields was at least partially due to the president\u2019s unprecedented and impertinent statement that he didn\u2019t like the fact that the Federal Reserve was raising interest rates.<\/p>\n<p>For the past two years, the financial markets have been an island of blissful ignorance, totally disregarding all of the nonsense swirling around the White House, whether real or invented.  The S&P 500 has risen about 30% since Donald Trump\u2019s election despite all of the clouds hanging over his presidency, from alleged collusion with the Russians to the Paul Manafort thing to Stormy Daniels to surrendering American sovereignty to Vladimir Putin.<\/p>\n<p>But now apparently the president has finally stepped in it deep enough to rattle the markets.<\/p>\n<p>Last week the yield on the benchmark 10-year Treasury note rose seven basis points to close the week just below 2.90%, its highest weekly close in a month. The yield on the 30-year bond jumped 10 bps to 3.03%, its highest level since June 26. According to the Wall Street Journal, some of that rise was due to Trump\u2019s comments about Fed policy, neglecting to mention that the yield on the 10-year German government note \u2013 the European benchmark \u2013 was also up sharply last week, up nine bps on the week to 0.37%, its highest level since June 20. <\/p>\n<p>So what did Trump say about the Fed that was so disturbing that it led some bondholders and traders to dump Treasury bonds and German Bunds?<!--more--> <\/p>\n<p>In an interview on <strong><a href=\"https:\/\/www.cnbc.com\/2018\/07\/19\/trump-lays-into-the-fed-says-hes-not-thrilled-about-interest-rate-.html\" rel=\"noopener\" target=\"_blank\">CNBC<\/a><\/strong> after Fed Chair Jerome Powell told the Senate Banking Committee that given the strong economy and rising inflation, <em>\u201cthe best way forward is to keep gradually raising\u201d<\/em> interest rates, Trump said he was <em>\u201cnot thrilled\u201d<\/em> about more rate hikes. <em>\u201cI don\u2019t like all of this work that we\u2019re putting into the economy, and then I see rates going up. I am not happy about it.\u201d<\/em><\/p>\n<p>Trump hedged that a bit by saying, <em>\u201cI\u2019m letting them do what they feel is best.\u201d<\/em> But then, following the brouhaha that followed, he added more fuel to the fire with a tweet on Friday with more criticism of the Fed: \u201cThe United States should not be penalized because we are doing so well. Tightening now hurts all that we have done.\u201d<\/p>\n<p>What Trump\u2019s fans love about him \u2013 and sufferers from TDS can\u2019t stand about him \u2013 is his penchant for daring to go where others in his position have never dared \u2013 and in the most in-your-face way possible \u2013 then doubling down on it when he sparks a controversy. He seems to particularly relish saying things that presidents of the United States aren\u2019t supposed to say, like criticizing our defense and trade partners in public. It\u2019s simply <em>\u201cundiplomatic\u201d<\/em> to do that, although doing it in private hasn\u2019t seemed to work, either.<\/p>\n<p>Now it\u2019s the Fed\u2019s turn in Trump\u2019s crosshairs. It\u2019s not clear why the Fed \u2013 or any other government agency, whether deemed to be <em>\u201cindependent\u201d<\/em> or not, like the Supreme Court \u2013 should be exempt from public criticism. Indeed, many commentators are now asking, <em>\u201cWhat took him so long?\u201d<\/em><\/p>\n<p><em>\u201cNow I\u2019m just saying the same thing that I would have said as a private citizen,\u201d<\/em> Trump said in the CNBC interview, perhaps anticipating the controversy that followed. <em>\u201cSo somebody would say, \u2018Oh, maybe you shouldn\u2019t say that as president.\u2019 I couldn\u2019t care less what they say, because my views haven\u2019t changed.\u201d<\/em><\/p>\n<p><em>\u201cLots of people talk about the Fed. That doesn\u2019t mean they\u2019re jawboning them,\u201d<\/em> Larry Kudlow, Trump\u2019s main economic adviser, said, adding that Trump was not <em>\u201cin any way, shape or form trying to influence the Fed or undermine its independence.\u201d <\/em><\/p>\n<p>Now, there\u2019s certainly a big difference between a private citizen and the president of the United States criticizing the Fed. However, that doesn\u2019t mean the president can\u2019t speak his mind. Everyone else does. And no amount of criticism is going to get this president to shut up \u2013 if anything, it\u2019s just going to get him going again. <\/p>\n<p>What\u2019s gotten lost in this controversy is whether Trump was right in his criticism of the Fed\u2019s rate policies rather than his right to voice them. And the answer to that is no. Instead of criticizing the Fed\u2019s monetary tightening, maybe Trump should embrace it as a vindication of his turning the economy around after eight years of stagnation, something the previous Fed regime couldn\u2019t do despite 10 years of zero interest rates. Then again, monetary policy is no substitute for good tax and regulatory policies.<\/p>\n<p>Visit back to read my next article! <\/p>\n<p><a href=\"http:\/\/www.ino.com\/blog\/meet-george-yacik\/\" target=\"_blank\">George Yacik<\/a><br \/>\nINO.com Contributor - Fed & Interest Rates<\/p>\n<p><span style=\"font-size: 12px; font-style: italic;\">Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.<\/span><\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>I suppose it was just a matter of time, but Trump Derangement Syndrome (TDS) finally hit the bond market last week. According to some experts, last week\u2019s nearly 10 basis point jump in long-term Treasury bond yields was at least partially due to the president\u2019s unprecedented and impertinent statement that he didn\u2019t like the fact [&hellip;]<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":16,"featured_media":47367,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6920],"tags":[8483,9252,9264,6824,6938,8771,5442,9445],"class_list":["post-47363","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ino-com-contributors","tag-10-year-treasury-note","tag-30-year-bond","tag-fed-chair-jerome-powell","tag-federal-open-market-committee-fomc","tag-george-yacik","tag-president-donald-trump","tag-the-federal-reserve","tag-trump-derangement-syndrome-tds"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v23.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Should The Fed Be Above Criticism? - INO.com Trader&#039;s Blog<\/title>\n<meta name=\"description\" content=\"I suppose it was just a matter of time, but Trump Derangement Syndrome finally hit the bond market last week. 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