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Trump team downplays stock market's plunge, calling economy's fundamentals strong

Jim Puzzanghera, Los Angeles Times on

Published in Political News

Mnuchin's comments came the day after stocks plunged: The Dow fell 1,175 points, or 4.6 percent, on Monday. The steep drop added to a decline in recent days and wiped out the Dow's and S&P 500's gains for the year.

On Tuesday, the Dow tumbled as much as 500 points at the market's open, then recouped the morning's losses in early trading before later dropping again.

President Trump has boasted continually in recent months about the booming stock market. He was silent on Monday's declines.

The White House issued a statement late Monday about the market drop, saying: "The president's focus is on our long-term economic fundamentals, which remain exceptionally strong, with strengthening U.S. economic growth, historically low unemployment, and increasing wages for American workers."

Vice President Mike Pence echoed that during a refueling stop in Alaska on his way to the opening ceremony of the Winter Olympics in South Korea. Asked by reporters late Monday for his reaction on the market decline, Pence touted recent strong job and wage growth.

"We couldn't be more proud of the fact that the stock market has increased by thousands of points since election day 2016," Pence said. He called Monday's sell-off "very likely, simply the ebb and flow of our stock markets."

 

Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, said at Tuesday's hearing that the recent market downturn was a predictable result of a strengthening economy and that Americans should see it as a positive sign.

"After eight years of failed economic policies that led to the slowest, weakest recovery in the modern era," he said, taking a jab at the Obama administration, "the economy is starting to take off and wages are finally growing again. Consumer optimism abounds."

"So how ironic but totally predictable that equity markets would now swoon over the prospects of higher interest rates and possible inflation associated with a breakout of economic growth," Hensarling told Mnuchin. "Artificially low interest rates may have benefited some on Wall Street, but they haven't been particularly helpful to Main Street."

Investors' fears of higher interest rates have helped drive stocks' recent downturn. Federal Reserve officials might need to push interest rates higher to head off higher inflation that could be fueled by the extra stimulus of the tax cuts.

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