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— This is the script of CNBC's news report for China's CCTV on December 18, 2018, Tuesday.
We know that the stateside market is different from China's, red represents drop. US market dived into a red ocean overnight. DJI slumped more than 500%, with 2.11% loss; S&P 500 declined above 2%, hitting the lowest since Oct 2017. In tech stocks, NASDAQ was off 2.27%
The reasons for the renewed plunge could be manifold: this week's events may have increased risk aversion and volatility; in addition to the uncertainty over the outlook for Brexit and the risk of a U.S. government shutdown, the decision of global central Banks, especially the Federal Reserve, to raise interest rates is a dark cloud hanging over the market.
The continued heavy selling recently pushed the US stock jump into the technique correction firstly since March 2016, and the continuing stock market slump has prompted the U.S. government and Wall Street executives to attack the fed's aggressive path of raising interest rates.
On Monday, U.S. local time, Trump tweeted that the greenbacks are strong and almost no inflation, when the outside is in chaos, the fed is even considering raising rates and that is "incredible". This speech is the 11th time that Trump criticed the fed for hiking rates this year. Especially in the recent one week, Trump has attacked the fed for 3 times. Navarro, White House trade adviser, joins the fed's opposition of higher interest rates, saying on this Wednesday that the fed should not hiking rates, it is not because the economy growth is in a slowdown, but U.S. economy is booming almost without any inflation, so it is not necessary to increase rates.
the only argument here for the fed raise rates now is that somehow they have to exert their independents form the white house, now this is a bad argument.
Additionally, hedge funds experts in Wall Street also expressed their opposite views, for example, Stanley Druckenmiller, who is believed as the most successful macro-hedge funds manager and Kevin Warsh, former fed governor said in a joint column published on the weekend that U.S. economy cannot suffer a big policy mistake and the fed should stop "Double blitz" that with high interest rates, tight liquidity, increasing rates and reducing balance sheet. The column also pointed out that U.S. economy is strong enough to maintain till next year, but once a huge policy mistake happens, it will be in sickness. So we can imagine that the fed is under big pressure for making the current monetary policy. Criticisms from government and market experts, as well as the unique power unveiled by the market itself, are pushing the fed to raise white flag.
Actually, there is a slightly change in the speech of some fed heavyweights, including Powell, when Nov comes, trying to comfort the market. Not only the hiking moves may be re-discussed again, but also reducing balance sheet might be more informative next year. So some analysts guess the fed may make raising rates mild, Morgen Stanly predicted the fed will just increase rates twice in 2019.
The continuous jump is likely to say that the fed is on the cross of making choice, the fed steered by Powell is facing the most severe policy challenge since Bernanke. We will keep an eye on this issue.