Mnuchin plays down U.S. market swoon as global rout rolls on

U.S. markets drop sharply as investors are spooked by rising rates

U.S. markets drop sharply as investors are spooked by rising rates

That is bad news for homebuyers and other prospective borrowers.

President Donald Trump signaled his anxiety about the Federal Reserve's plan to keep raising interest rates into 2019 after stocks plunged on Wednesday.

But it amounts to good news for the long-term direction of the economy. Netflix, for example, is still up more than 60 percent for the year, and Amazon is up almost 50 percent.

But beyond those headline numbers, the details of how the prices of different types of securities have moved relative to one another tell a story that is decidedly optimistic.

"I think it's good", Trump said of the stock decline.

Financing expenses are one of a business's chief costs, higher interest rates squeeze profit margins and activities that might have been profitable at lower interest rates, including hiring, become marginable of unprofitable, and do not take place. It is also expected to raise rates again by the end of the year. Along with Dow, the S&P 500 tumbled 3.3 percent and the Nasdaq composite fell by four percent.

The Fed's effort to shrink its balance sheet is creating added uncertainty, since it's unclear how the central bank's reduction in its bond portfolio will affect markets, he said. "It's reflecting the possibility that this recovery has further legs". The current benchmark interest rate is 2 to 2.25 percent.

Stocks are in the midst of a scary October slump, sliding sharply because investors are anxious about rising interest rates. Now the Fed's own projections are consistent with the path of rate increases priced into markets. "I think the Fed has gone insane", he charged.

Moreover, Roberto Perli of Cornerstone Macro calculates that a big part of the higher rates is an increase in the "term premium". It was more than $40 five years ago.

Raising interest rates was justified "for those economies that are showing much improved growth, inflation that is picking up... unemployment that is extremely low", Lagarde told a press briefing in Bali, Indonesia where the International Monetary Fund is holding its annual meeting.

"Yes, they're down, but they're definitely the best performers", Benedict said. "The trend is clearly up, and the market is betting that will continue".

The markets have been on a historic climb - with the Dow and S&P each notching dozens of new highs since 2016 - buoyed by a strong USA economy and solid corporate earnings.

Of course, there are downsides to the higher rates. On Thursday, he renewed his criticism, blaming the recent downturn in the stock market on the Fed's rate policy. Investors would withdraw money from the Indian markets as the USA ones would offer better rate of return.

After a long stretch of relative calm, the stock market has suffered sharp losses over the last week as bond yields surged. Ten-year yields reached 3.26 percent Tuesday, a level last seen since 2011.

"The Fed continues to flood the market with USA dollars", he said in one tweet. Lower demand then puts a damper on prices.

Trump has often pointed to stock market records set during his time in office as a measure of his success.

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