Global investors are preparing for more turmoil in 2019 after the White House intensifies its criticism of the most important central banker in the United States.
Over the weekend, a series of reports claimed that Donald Trump had discussed the possibility of firing Federal Reserve Chairman Jerome Powell. An unprecedented movement would cause greater instability in the markets, which have already had their worst year since the 2008 crisis.
US officials were quick to deny that Trump had suggested removing Powell, who was appointed by the president barely a year ago.
Treasury Secretary Steven Mnuchin tweeted that he had spoken with the president, who insisted that he "never suggested firing" Powell, and did not think he had the right to do this.
However, Trump also stated, through Mnuchin, that he is "totally in disagreement" with the Fed's "absolutely terrible" policy of raising interest rates and dismantling its bond-buying stimulus program, building up more pressure on the independent central bank of the United States.
Trump's attacks on the Fed intensified as stock markets fell sharply in the fall. Having taken credit for the increase in stock prices in 2017, the president has been affected by the recent massive sale of Wall Street, which has eliminated more than 15% of the value of the largest companies in the US. UU
Bloomberg reported that Trump's frustrations with Powell have been "intensified" since the Fed ignored his complaints by raising borrowing costs last week, and indicated that there are likely to be two more increases in 2019.
However, it is unclear if Trump could fire Powell if he wanted, as Mnuchin's tweet points out. A Fed governor can only be fired for "cause," such as misconduct, instead of simply raising interest rates faster than the White House would like.
Stock markets fell after the Fed's decision last week, as many investors abandoned stocks and piled into safe haven assets, such as the US government debt. UU
John Hardy, head of FX strategy at Saxo Bank, said: "The market seems to be telling us that the Fed is making a policy mistake that it will regret since it will eventually be forced to reverse."
Wall Street has endured its worst December since 1931. The Dow Jones industrial average has plummeted by 12% since the beginning of the month, given growing concerns that the global economy is slowing.
The loss means that approximately $ 7bn has been eliminated from global stocks this year. The MSCI All Country World Index, a broad measure of stocks worldwide, has had its first double-digit loss in any year since the 2008 crisis.
Deutsche Bank has calculated that 93% of assets produced a negative total return this year, the worst performance recorded.
The bank's leading international economist, Torsten Slok, drew up a list of 30 potential threats to the market in 2019. It includes the risk that the US economy will UU It colds due to a slowdown in China and Europe, the closure of the US government. UU Brexit and a deeper trade war.
Last week, the FTSE 100 of the United Kingdom fell to its lowest level in 28 months. US stocks ended the week at a 14-month low, when the US government shut down. UU It alarmed Wall Street.
Lukman Otunuga, a research analyst at FXTM, said the escalating escalation between Trump and Congress over financing a wall on the border with Mexico had created great pain in the markets.
"It was an extraordinarily terrible trading week for the financial markets amid concerns about the rise in US interest rates, the slowdown in global growth, the uncertainty of Brexit and the chaos in Washington." Given the factors of geopolitical risk weigh heavily on investor confidence, financial markets are still running the risk of concluding 2018 in a risky tone, "said Otunuga.