Tags: Ron Insana | Trump | Fed | Bear | Market

Insana: Trump's 'Reckless Abandon,' Fed Tactics May Spark Bear Market

By    |   Wednesday, 12 April 2017 05:34 PM

Economic guru Ron Insana warns that President Donald Trump and the United States are engaged in a delicate and dangerous dance with two well-known triggers of a bear market for stocks,

The Trump administration's saber rattling at foreign rivals could lead to serious consequences, while the Federal Reserve is determined to keep hiking interest rates.

“The Trump administration, despite campaign promises to the contrary, is showing signs that it is willing to flex its military muscle with almost reckless abandon,” he wrote for CNBC.com.

“Moving a battle fleet into the waters off North Korea, and quite close to China, is the type of sabre rattling that can lead to war," wrote Insana, a CNBC and MSNBC contributor and the author of four books on Wall Street.

"The administration has said it is willing to use pre-emptive force against North Korea, which continues to test ballistic missiles and, quite possibly, nuclear weapons,” Insana wrote.

“Under another administration, one filled with seasoned foreign policy experts, diplomatic resources and a deliberative process, such maneuvers might be considered strategically sound … if properly vetted and understood by large adversaries like Russia, or ‘frenemies,’ like China,” he wrote.

“Clearly no one in this administration has read military history, or the warnings of military strategists like Sun-Tzu or Clausewitz. Without a political solution in place, military force should never be used as both a means and an end,” Insana wrote.

“Both Napoleon and Hitler fought ‘two-front wars’ which ended, thankfully, in humiliating defeats. The Trump Administration already inoculated to such precedents, political and military, claims a strategy of unpredictability makes it a wily and cunning adversary,” Insana wrote.

“Wall Street appears to be dancing past this global graveyard without so much as a passing thought. And, true, it represents a worst-case scenario for this new administration,” Insana wrote.

“Bear markets, history shows, are often started by two things; rising interest rates and the onset of war. The Fed is certainly on the path of raising rates. If, indeed, war is a serious risk, then Wall Street will find itself in the teeth of the bear, while the world finds itself in the teeth of an even more fearsome beast,” he wrote.

A "bear" market is a 20 percent decline from the highs; a "correction" is a 10 percent drop.

However, not everyone is so gloomy about the market's future under Trump.

David Horowitz, author of the best-selling book "Big Agenda: President Trump's Plan to Save America," told Newsmax TV that the market rally since Trump won the election has more room for gains as the president pushes his pro-business agenda.

“There's more upside. Starting from when he was president-elect he started this stock market boom,” he told “The Income Generation Show.”

“There will be corrections. There are going to be setbacks along the way like the healthcare which they hurried too fast. If you're looking over the long term of this administration I think the stock market is going to love Trump,” Horowitz told Newsmax TV.

The S&P 500 has risen 10 percent since the Nov. 8 election after reaching a record high in early March.

Meanwhile, Fitch Ratings has apparently reversed its opinion of Trump’s effect on global economic stability.

Fitch, one of the three major ratings services, issued “a mostly glowing report” Tuesday about the state of domestic finances, CNBC.com explained.

In February, Fitch warned that Trump posed a danger to global economic stability.

“Fitch, in a far cry from its dire warnings in February, both reaffirmed the sterling AAA credit rating for the U.S. and raised its outlook for gross domestic product growth,” CNBC explained.

The ratings agency says the president's pro-growth agenda would push GDP more than expected. Fitch sees U.S. growth at a 2.3 percent rate in 2016 and 2.6 percent in 2018 — better than the 1.6 percent average GDP rate under President Barack Obama.

"The new administration's focus on deregulation and tax cuts has spurred higher business confidence and would be positive for growth if carried through," Fitch analyst Charles Seville and others said in a report for clients

(Newsmax wires services contributed to this report).

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Ron Insana warns that President Donald Trump and the United States are engaged in a delicate and dangerous dance with two well-known triggers of a bear market for stocks,
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Wednesday, 12 April 2017 05:34 PM
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