Are the markets a tell on the midterms?

Are we seeing real-world exercises being conducted as a result of President Trump’s ongoing battle with the Deep State?

All of a sudden last week large institutional investors woke up and decided that the bull market was coming to an end and the Federal Reserve, which has been begging for the last decade to get the inflation rate close to 2 percent, discovered that runaway inflation was a real concern and said it would raise rates “aggressively” to combat it.

Now admittedly no market only rises with no corrections or pullbacks and it may be a little early to attribute the latest equity choppiness to anything more than profit taking and it being October, but the timing is curious.

The markets also have international concerns in Italy and China, which could be the contagion to hurt US growth and need to be watched carefully, but not to the degree we are seeing right now.

Trump did pick Fed chief Jerome Powell and he has reigned in the number of voices in the Fed speaking on the economy. Under ex-chief Janet Yellen it seemed even the maintenance staff at the Fed were allow to opine on monetary policy for TV audiences.

The President on Wednesday questioned the Fed’s rhetoric on inflation to reporters saying he thought it was crazy for Powell & Co. to be so aggressive in its stance on raising rates.

You see the Fed doesn’t really have to raise rates to curtail growth right now. The threat alone is enough to squeeze lenders into jacking up loan rates or to call in more questionable loans, which all dampen continuing growth. And as markets fall margin calls can steepen the decline as investors sell what they have to cover other bets.

So let’s keep an eye on this as the midterms near. I’m sure The President will have much to say should this sell off continue.

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