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John Crudele: Next President Will Have Major Stock-Market Worries

John Crudele: Next President Will Have Major Stock-Market Worries

By    |   Tuesday, 03 May 2016 02:38 PM

The next president is going to face major problems with the stock market unless he or she approves of the Federal Reserve’s efforts to buoy asset values with monetary stimulus, says John Crudele, business columnist at the New York Post.
 
“The Federal Reserve is obviously attempting to keep the stock market from falling,” he writes. “The Fed and its compatriots on Wall Street have been buying stock futures contracts whenever the market looks weak. In short, equities here are also rigged. And unless the next president isn’t OK with that, Wall Street and investors are going to have a difficult time.

Real estate developer Donald Trump is the leading Republication candidate for the presidency, while Hillary Clinton is the Democratic frontrunner. The election will be held November 8.
                 
The stock market is disconnected from the Main Street economy, which was estimated to have grown 0.5 percent in the first quarter from a year earlier, the weakest in two years. Meanwhile, the S&P 500 rebounded 13 percent from a February low and is within 3 percent of last year’s record high.

“The economy is not behaving in a way that the stock market would like,” Crudele writes. “The nation’s gross domestic product in the fourth quarter of 2015 grew at a very listless pace and first-quarter growth this year was nearly nonexistent.”

The market has gotten support from record levels of stock buybacks, while profits are declining, even outside the battered energy industry.

“Profits for the 500 companies that make up the S&P’s index are down 5.7 percent in the first quarter and are expected to decline another 3.1 percent in the current three months,” Crudele writes. “Even if you take out the performance of energy companies that are vulnerable to the drop in oil prices, overall corporate profits are down 0.3 percent in the first quarter and are expected to rise only 0.9 percent this quarter.”

The Fed, which officially is seeking price stability and low unemployment, has policies that are in line with other countries trying to prop up asset values and promote consumer confidence.

“Stock markets are being manipulated. The Chinese openly prop up their stocks and they aren’t shy about it. The Japanese do the same,” Crudele says. “Mario Draghi, the head of the European Central Bank and an ex-Goldman Sachs executive, for years has been taking actions that keep stocks higher and has encouraged investors to buy equities.”

U.S. stocks fell about 1 percent on Tuesday in another sign that the rally since February may be on shaky ground, The Wall Street Journal reported.

“Our clients are very edgy, they’re nervous. The market drops like a rock into mid-February and then rallies from there, two very quick moves in a short time,” said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute, according to the newspaper.

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The next president is going to face major problems with the stock market unless he or she approves of the Federal Reserve's efforts to buoy asset values with monetary stimulus, says John Crudele, business columnist at the New York Post. "The Federal Reserve is obviously...
stocks, market, investing, election
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2016-38-03
Tuesday, 03 May 2016 02:38 PM
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