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Stock market sell-off continues as U.S. government shutdown looms
The selling in the last two days came after the Federal Reserve raised interest rates for the fourth time this year and signaled it was likely to continue raising rates next year, although at a slower rate than it previously forecast.
Scott Wren, senior global equity strategist at Wells Fargo Investment Institute, said that Fed Chairman Jerome Powell didn't appear concerned about the state of the U.S. economy, despite deepening worries among investors that growth could slow even more in 2019 and 2020. Wren said investors want to know that the Fed is keeping a close eye on the situation.
"He may be a little overconfident," said Wren. "The Fed needs to be paying attention to what's going on."
Powell also acknowledged that the Fed's decisions are getting trickier because they need to be based on the most up-to-date figures on jobs, inflation, and economic growth. For the last three years the Fed told investors weeks in advance that it was almost certain to increase rates. But things are less certain now, and the market hates uncertainty.
Treasury Secretary Steven Mnuchin said the market's reaction to the Fed was "completely overblown."
Investors have responded to a weakening outlook for the U.S. economy by selling stocks and buying ultra-safe U.S. government bonds. The bond-buying has the effect of sending long-term bond yields lower, which reduces interest rates on mortgages and other kinds of long-term loans. That's generally good for the economy.
At the same time, the reduced bond yields can send a negative signal on the economy. The bond market has correctly predicted several previous U.S. recessions by buying long-term bonds and sending yields down.
Shutdown looming
The possibility of a partial shutdown of the federal government also loomed over the market on Thursday, as funding for the government runs out at midnight Friday. In general, shutdowns don't affect the U.S. economy or the market much unless they stretch out for several weeks, which would delay paychecks for federal employees.
Long term bond yields have dipped below short-term ones, something call it an "inverted yield curve" which is often taken as a sign a recession is coming, although it's not a perfect signal and when recessions do follow inversions in the yield curve, it can take a year or more.
"The bond market has been telling us something for about a year, and that is there's not going to be much inflation and there's not going to be a sustained surge in economic growth," said Wren, of Wells Fargo.
https://www.cbc.ca/news/business/dollar-stocks-markets-shutdown-1.4954948
The selling in the last two days came after the Federal Reserve raised interest rates for the fourth time this year and signaled it was likely to continue raising rates next year, although at a slower rate than it previously forecast.
Scott Wren, senior global equity strategist at Wells Fargo Investment Institute, said that Fed Chairman Jerome Powell didn't appear concerned about the state of the U.S. economy, despite deepening worries among investors that growth could slow even more in 2019 and 2020. Wren said investors want to know that the Fed is keeping a close eye on the situation.
"He may be a little overconfident," said Wren. "The Fed needs to be paying attention to what's going on."
Powell also acknowledged that the Fed's decisions are getting trickier because they need to be based on the most up-to-date figures on jobs, inflation, and economic growth. For the last three years the Fed told investors weeks in advance that it was almost certain to increase rates. But things are less certain now, and the market hates uncertainty.
Treasury Secretary Steven Mnuchin said the market's reaction to the Fed was "completely overblown."
Investors have responded to a weakening outlook for the U.S. economy by selling stocks and buying ultra-safe U.S. government bonds. The bond-buying has the effect of sending long-term bond yields lower, which reduces interest rates on mortgages and other kinds of long-term loans. That's generally good for the economy.
At the same time, the reduced bond yields can send a negative signal on the economy. The bond market has correctly predicted several previous U.S. recessions by buying long-term bonds and sending yields down.
Shutdown looming
The possibility of a partial shutdown of the federal government also loomed over the market on Thursday, as funding for the government runs out at midnight Friday. In general, shutdowns don't affect the U.S. economy or the market much unless they stretch out for several weeks, which would delay paychecks for federal employees.
Long term bond yields have dipped below short-term ones, something call it an "inverted yield curve" which is often taken as a sign a recession is coming, although it's not a perfect signal and when recessions do follow inversions in the yield curve, it can take a year or more.
"The bond market has been telling us something for about a year, and that is there's not going to be much inflation and there's not going to be a sustained surge in economic growth," said Wren, of Wells Fargo.
https://www.cbc.ca/news/business/dollar-stocks-markets-shutdown-1.4954948
