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Why the Trump administration’s response to falling stocks left the markets more jittery

U.S. stocks plunged again after markets finished their worst trading week since the 2008 financial crisis. The drop came after President Trump criticized the Federal Reserve on Twitter and Steve Mnuchin attempted to calm investors, instead causing more concern. Annie Lowrey of The Atlantic joins William Brangham to put the bear market into perspective amid a “general sense of chaos” in Washington.

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  • Nick Schifrin:

    There was no Christmas Eve gift for investors, shareholders, retirees or the jittery markets. Today was the worst trading day ever on a Christmas Eve. And it comes after the markets finished their worst trading week since the 2008 financial crisis.

    Slower growth, higher interest rates, lower profits, a shutdown and trade wars, there's plenty to worry investors.

    But as William Brangham tells us, the president and his team seem to be adding to that anxiety.

  • William Brangham:

    Heading into today, several of the major stock indexes were already in bear market territory for the first time in a decade.

    That includes the Nasdaq and the Standard & Poor's 500. A bear market is when an index drops 20 percent from a recent high. Then, over the weekend, there were new revelations that further unnerved investors. President Trump was reportedly considering firing the chairman of the Federal Reserve, Jay Powell. Administration officials have since denied the president had any such intention.

    But the president again went after the Fed today, tweeting — quote — "The only problem our economy has is the Fed. They don't have a feel for the market."

    On top of that, yesterday, Treasury Secretary Steven Mnuchin issued this puzzling statement, saying he'd spoken with the heads of the biggest U.S. banks to reiterate the strength of the financial system and to confirm their reserves of cash for lending.

    To many, this hearkened back to a concern not seen since the Great Recession in 2008.

    Annie Lowrey watches all this for "The Atlantic." And she joins me now from New York.

    Annie, thank you for being here.

    You wrote a column in "The Atlantic" where you were describing this letter that Mnuchin put out yesterday, and equated it to going to the doctor when you have the symptoms of a head cold, your doctor can't stop talking about cancer, and how alarming that is.

    I mean, what do you think the secretary was up to?

  • Annie Lowrey:


    So it would be quite normal for the treasury secretary to talk to the heads of big banks. This is something that happens all the time, that isn't surprising. But the Treasury put out this press release on a weekend, before a holiday, assuring market participants that nothing was happening, indicating that there was some kind of financial crisis or liquidity crisis at the big banks, which is not something that anybody was worried about.

    We're in a very kind of classic vanilla bear market, but there's no signs that the nation's banks are teetering or that we have to have those kind of 2007-2008 worries again.

    And so it's a very weird statement. And it, frankly, like, unnerved a lot of market participants, who are like, does Secretary Mnuchin see something thing that we don't see, is there something that we're missing?

    Because this just seems like a down market.

  • William Brangham:

    I guess that's just a mystery we will have to wait and find out about.

    What is it, do you think, is really going on with the market? We have seen this very precipitous drop. What do you think is driving that?

  • Annie Lowrey:

    There are a number of fundamental issues that the market is responding to.

    So, first and perhaps most important, the Fed is raising interest rates. That's increasing borrowing costs. It's slowing the economy down. The markets are pricing that in. And it's starting to show up in terms of decreasing home sales, decreasing car sales, perhaps increasing defaults.

    We have problems in a number of kind of financial markets. So the leverage loan market, for instance, is having some issues, where people are losing some money.

    All of this is somewhat to be expected, though, right? Like, we have been in a bull market for 10 years. And this is seen as being kind of a natural correction. People are also concerned about Donald Trump's trade war. They are concerned about uncertainty emanating from Washington. They are concerned about slowing global growth.

    All of these things are affecting the markets, and they might indicate that the U.S. economy might slow down. But, again, that's very different from being in the sort of situation that Mnuchin was gesturing to, where you might have a kind of financial crisis, and be worried about the stability and the safety of American financial institutions themselves.

  • William Brangham:

    The president today, as we saw, was tweeting that the only problem the economy has is the Federal Reserve and their announcement that they're upping interest rates.

    What do you think is going on there? Is the president simply trying to find someone to blame for this stock market decline?

  • Annie Lowrey:


    The president has, quite unusually, seen a rising market as being a sign of his success. He points to a rising market as being a good indicator of economic health, which it really isn't. And, therefore, he's looking for somebody to blame now that the market is going down.

    It's really important to note that the Federal Reserve is not responsible for the market going up. It doesn't see the market going up as being its responsibility. It is responsible for two things, and two things only, price stability and unemployment.

    And both of those things are looking pretty good. So that happening within the context of a healthy financial sector means that the Fed is going to continue probably raising rates, unless we start to see those signs of the economy itself slowing down.

  • William Brangham:

    But does the president or some of his allies who agree with the criticism of the Fed that there is — there might be some underlying factors?

    I mean, there is a sense that the global economy is slowing down, and that maybe we might see those ripple effects fairly soon, and that maybe raising interest rates is not the best idea.

  • Annie Lowrey:


    And I think that if you started to see the unemployment rate go up, inflation to drop, growth to slow down, those kind of things would absolutely give the Fed pause. But the markets going down and Donald Trump's sort of yelling at the Fed is not something that's really going to change their path.

    Right now, I think that the markets concerned about instability emanating from Washington from the Trump administration itself. And one thing that happened with Secretary Mnuchin's statement, talking to market participants, is that they were weirded out by it, and they felt like it was symbolic of the kind of shambolic state of government, inexperience at the Treasury.

    And so that statement alone kind of freaked them out, along with all of the tweets that Donald Trump has been making, the government shutdown, this general sense of chaos emanating from Washington. So I do think that uncertainty is sort of playing into the animal spirits here.

  • William Brangham:

    I want to touch on something you referenced before. Then I'm wondering if we are making too much of this stock market decline, because, as you say, we have had 10 years of a truly incredible market, and now we have had three months of a bad stock market.

    But 10 years vs. three months, that that's an unequal ratio.

  • Annie Lowrey:

    Absolutely. Markets go up, they go down. There's nothing right now to indicate that this is much more than a soft patch.

    The economy might slow down. We might even enter recession. But right now, this is really just a bear market, a correction in the market. And we would need more data to indicate that there was sort of a deeper underlying problem just than stocks kind of selling off and investors losing some money.

  • William Brangham:

    All right, Annie Lowrey of "The Atlantic," thanks for coming in on Christmas Eve.

  • Annie Lowrey:

    Thanks for having me.

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