In an interview with CNBC, President Donald Trump said GDP growth would have been much closer to 4% at this point if the Federal Reserve hadn’t raised rates so quickly before cutting them last year. “And I—I could see 5,000 to 10,000 points more on the Dow. But that was a killer when they raised the rate. It was just a big mistake,” Trump added. Trump also mentioned the issues Boeing has had for the last year and the strikes at General Motor, both of which have contributed to an overall slowdown in consumer and investor sentiment.
Larry Kudlow, the president’s top economic advisor, agrees. He predicted a 3% GDP growth in 2020, calling the Trump years a “mini upcycle.” Fresh economic data on manufacturing and trade released in January showed the American economy ended 2019 on a strong note, says CNBC. Expectations at this point are for 2% economic growth in the fourth quarter, down from 2.9% in 2018.
While Trump and Kudlow criticize the Federal Reserve for previous rate hikes, JPMorgan Chase CEO Jamie Dimon is concerned about lowering rates too much.
“The only thing I have trepidation about is negative interest rates, QE, and the diversion between stock prices and bond prices and yield and stuff like that,” Dimon told CNBC.
Central banks in Japan and Europe have used negative interest rates to stimulate their economies, says CNBC, adding that “economists are divided over their effectiveness to reignite economic growth, and some fear negative rates can keep growth subdued rather than lift it. They have been used in conjunction with quantitative easing, in the U.S. and abroad, where central banks purchase assets like Treasury bills.”
However, Dimon believes “it’s very hard for central banks to forever make up for bad policy elsewhere.” He fears negative interest rates, describing them as an abnormal situation. Economists are also figuring out what this would mean in the short and long term for the economies in which negative rates exist, and on a global scale.
Sectors: The average momentum score for the Sector Benchmark ETFs increased from 23.18 to 27.09. Momentum increased in nine of 11 sectors last week. Utilities had the largest increase in momentum score with a 16-point gain. Technology remained in first after a 5-point increase in momentum score. Energy fell to last place after a 14-point loss in momentum score.
Factors: Among the Factor Benchmark ETFs, the average factor score increased from 25.00 to 28.83. Momentum increased in nine of 12 factors last week and one remained neutral. The Momentum factor had the largest increase in momentum score with an 11-point gain. Value lost 2 points, High Beta fell by 1 point, and Yield remained neutral. High Beta and Yield remained in first and last place, respectively.
Global: The average Global Benchmark ETF momentum score decreased from 26.91 to 24.27. Momentum in the global sector increased in four of 11 regions last week, one remained neutral, and the rest fell. Canada had the largest increase in momentum score with a 5-point gain. China remained in first place despite a 15-point decrease in momentum score. The EAFE remained neutral. Latin America fell to last place.