The Trump administration is openly lobbying the Fed to cut interest rates by 50 basis points. Larry Kudlow & POTUS are working social media nonstop.
Of course, this is uncouth, inappropriate and a violation of a standing code for the Fed to be apolitical – and all that.
But let’s also be brutally candid here for one New York second: four months ago the Fed was hawkish as all end all. They were also dead wrong. They flipped so massively the greatest bond trader in the world, Jeffrey Gundlach of Doubleline, called their reversal “unprecedented”.
Where was Trump? He was right, actually. He was way out in front of economic reality. The Fed missed it; and Trump nailed it.
Now, I know nothing makes some people’s blood boil more than reading on a lazy Sunday afternoon: “Trump was right.” So I’m sorry to have startled you.
But a question: who do you think market participants are listening to now? Kudlow & Trump? Or the Fed Gang Who Can’t Shoot Straight. The bond market has tilted its hand; clearly, fixed income investors see worry on the horizon.
I’m all for the Fed being apolitical. Yes, let’s do that. But if the Fed wants to remain “untouchable” forever, they need to be right more often. Their track record is simply not impressive. Trump’s meddling is but only the latest example.