Does the Fed control Trump’s 2020 destiny?


President Trump has frequently pointed to the rising U.S. stock market as affirmation of his economic supergenius. But what the market giveth, it can also taketh away.

This week, stocks dropped sharply after the first congressional testimony of Trump’s new Federal Reserve Chairman Jerome Powell. Why? Perhaps because investors interpreted his comments as raising the odds that the central bank will accelerate its pace of interest rate hikes. The result could be higher-than-expected borrowing costs and lower corporate profits.

As it happens, just as Powell was alerting markets to the Fed’s possibly more hawkish turn, the Drudge Report was blaring a headline that Trump was ready to announce his plans to run for re-election in 2020 and appoint a digital guru to run the effort. But clever Facebook ads won’t be enough to win the president a second term. Team Trump is surely counting on the economy to provide a powerful tailwind for the campaign. Indeed, new forecasts from the White House economic team anticipate 2018 will be the start of a long-term upturn in economic growth.

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