Asked if he saw an economic crisis developing, after the Fed’s emergency rate cut failed to stop the market plunge, Kudlow on Tuesday said: “I don’t. I’ll be honest.”
Views on stocks remain decidedly mixed after the Fed cut fell flat. “The market was expecting a more coordinated and decisive response and not just one from the Fed,” said Solita Marcelli, deputy chief investment officer for the Americas at UBS Global Wealth Management.
Trump’s re-election bid this year is based heavily on the economy, and fresh market highs once were a staple of his rally speeches. He celebrated a rebound Monday before claiming Tuesday that he had not seen that the Dow Jones Industrial Average had sunk nearly 3%.
Trump and his administration have said they’ll propose a tax cut later this year as part of a re-election platform, but he began Tuesday by calling on House Democrats to propose a “very simple one year payroll tax cut.” The tweet was part of the administration’s efforts to check how receptive Capitol Hill is to a new tax cut package, one administration official said.
But Treasury Secretary Steven Mnuchin later said the administration isn’t considering a payroll tax cut as part of its response to the coronavirus. He added that the virus sell-off isn’t comparable to the financial crisis a decade ago. “We will get through this,” he told reporters Tuesday. Market swings are happening because “the markets struggle to assess new risks.”
The administration has loosely discussed targeted measures, like supporting companies to avoid furloughing workers and guaranteeing sick pay to encourage the ill to stay home, a person familiar with the matter said.
Other Culprits
So far, Trump has pointed to other culprits for the slide in stocks. He tried at first to talk up stocks as a buying opportunity a week ago, before blaming the media and Democrats for exaggerating the risk of the virus. He then pivoted back to his long-running complaint that interest rates are too high, publicly badgering the Fed for days before Tuesday’s emergency cut.
For now, the president should keep focusing on stopping the spread of the virus itself, said Joel Griffith, a research fellow at the Heritage Foundation, a conservative policy institute. “In that respect I think the Trump administration is on the right course,” Griffith said.
“We’ve got a fundamentally strong economy,” he said. “I’m very concerned that too many people are sensationalizing these events, and that might encourage counterproductive behaviors and needless economic consequences.”
--With assistance from Shawn Donnan, Sarah Ponczek and Simon Kennedy.
This article was provided by Bloomberg News.