A rundown on the key signs in the economy as people clutch their wallets. Keep calm and carry on.
In my 14 years as a business editor, I always looked forward to the week between Christmas and New Year’s Day.
Little news happened. A respite from 16-hour work days. The chance to catch up on myriad administrative tasks. Going from Mach 5 with My Hair on Fire to something like a normal civilian life.
This is not a normal Christmas-New Year’s week.
U.S. Treasury Secretary Steven Mnuchin called the chief executives of the six biggest banks over the weekend to reassure them — and disclosed it in a tweet.
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Naturally, this sent the stock market into a tailspin Monday morning.
Why would the chief T-man call the bankers? What does he know that we don’t? Reassure them from what?
The president suddenly sacked Defense Secretary Jim Mattis, moving up his departure date by nearly two months after “Individual 1” realized, from television, the tough resignation letter that the Washington native had sent him.
Then there’s the president’s intransigence, over funding for a border wall, that shut down the government. He also threatened to fire Federal Reserve Chairman Jay Powell, blaming him, rather than his own trade conflicts and other actions, for the market plunge.
At the least, Mnuchin’s actions were a kick-in-the-teeth reminder that the Trump economic team is singularly inexperienced.
While they missed the signals leading up to the housing crash in 2006-07, Fed Chairman Ben Bernanke, Treasury Secretary Hank Paulson and New York Fed President Tim Geithner brought a Santa’s bag of experience to the ensuing crisis.
Bernanke was the foremost expert on the central bank’s actions before and during the Great Depression. Paulson was CEO of Goldman Sachs before becoming Treasury Secretary — a “vampire squid” perhaps, but the leading investment bank in the world. Geithner was a veteran of crisis management at the Treasury Department before becoming head of the most important Federal Reserve bank. Their steady hands prevented the Panic of October 2008 from becoming a second Great Depression.
No such luck this time. Mnuchin was a hedge-fund guy. Powell is inexperienced and untested.
What to watch this week:
Will the stock market stabilize? Among the functions of the billions of individual trading actions — supercharged by computers and algorithms — is information-seeking.
As with business editors, the market typically has a snoozy week this time of year. Maybe that will return once investors process the weekend’s news, prospects for earnings at key companies, the trade situation, etc.
But don’t count on it. With both the S&P 500 and Nasdaq in correction territory — as I write, the broad S&P is down 20 percent from its previous peak — market players are on a hair trigger to sell.
Policies, policies, policies. Of great concern to Wall Street and Main Street is the trade situation with China. Trump’s tariffs have created far more losers than winners among industries and farmers. The prospect of a full-blown trade war is real. As bad, the administration is antagonizing allies with tariffs, tariff threats and disdain for traditional American leadership.
The government shutdown is “partial,” but no quick end is seen. It signals something more dangerous than gridlock, a president who is willing to set aside every norm. Extra present for fraudsters: The Securities and Exchange Commission will go into sleep mode on Thursday. This is no ordinary time.
Is something bad coming? This is the second-longest expansion on record — it can’t last forever. Most forecasts see a slowdown in 2019, especially after the unnecessary stimulus of the GOP tax cuts wears off. Consumers are less optimistic than at any time in Trump’s presidency. In a Wall Street Journal survey, a majority of forecasters predicted a recession in 2020.
None of us wants this to happen. And it may not. But the market is jittery for a reason — made worse by Trump’s rants and impetuous actions.
What should I do? I’m not a certified financial planner and don’t play one on television. It’s unethical for a journalist to give financial advice.
So, some broad strokes. Always make sure you are appropriately invested for your goals and risk tolerance. Don’t sell panicky, especially if you believe in your stock or mutual fund. In bitcoin? Sucker.
Otherwise, most working folks, and the millions of low-wage workers with not even a 401(k), will get the worst kicks in the head. It’s always been that way.
But, again, the worst may not happen and this may turn into a normal calm week.
I wish you a Merry Christmas, happy holidays and the very best in the New Year. Thank you for reading.