The Federal Reserve and Janet Yellen have once again shown their true colors. After an aggressive stance in December about possibly having four rate hikes, they have retreated from being hawks and have now gone back to being doves. The stock market, along with President Trump, must be getting exhausted from this game of cat and mouse. Surely, the market was strong enough in December to have a hawkish stance. And recently the Dow has hit over 20,000 points.
But, as we look further we can clearly see that fear and uncertainty has not only gripped the markets this week, but it also has the Fed in a dovish retreat back to safety behind the word games that they play so well. It is a game of poker between Wall Street and the Federal Reserve. In 2015, the Fed would just utter the words ‘rate hike’ and it would send the markets in a downward spiral, shaving off over a thousand points. Now, it seems that since the Fed backs off, we get the same reaction. Wall Street wants to have its cake and be able to eat it too. But the Federal Reserve just can’t give Wall Street everything it wants at the moment.
The United States now has much on its plate in terms of trade and policy. The current actions of President Trump has many countries and investors scratching their heads wondering if the United States is the place to invest right now. Just recently, Iran has dumped the dollar and is going to do $41 billion of business in other currencies. The markets, as well as the rest of the world, are now taking Trump very seriously. This Trump rally appears to be over, or at least cooling off for the time being. And the dollar has pulled back quite nicely as well. The United States has not seen this much action in Washington in over 10 years or more. In terms of policy and Trump, it seems that the United States is beginning to play hardball once again.