The stock market’s “fear gauge” – the CBOE VIX – spiked nearly 20% on Friday as a series of Trump tweets ignited Wall Street panic. | Source: Scott Olson / Getty Images / AFP
By CCN Markets: Friday was one of those days where headline news scared the heck out of investors, and the stock market’s “fear gauge” proves it.
The Cboe Volatility Index, or VIX, soared nearly 20%, peaking at 21.07 before settling down to 19.87 by the closing bell.
The stock market’s “fear gauge” soared 20% on Friday. | Source: Yahoo Finance
Friday’s VIX Spike Signals Investor Worries
Fear started gripping investors early Friday morning when China retaliated against the U.S. by imposing its own set of new tariffs on American goods worth roughly $75 billion.
Investors were served another blow when Federal Reserve Chair Jay Powell stopped short of specifying any future interest rate cuts during his speech at Jackson Hole. Key points hit upon by the chair included:
- There is evidence of a global slowdown, and it’s worsened since the July Fed meeting.
- The outlook is deteriorating.
- The Fed will continue to watch developments carefully.
“Trade policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the United States,” Powell said.
Trump appointed Powell in February 2018. He’s hounded him relentlessly over interest rates since Powell voted with fellow Fed members to hike rates in 2018.
The head-scratcher Trump tweets that left the stock market reeling
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In tweets that left stock market investors and observers reeling, Trump went after Powell with attacks that seemed excessive – even for the president.
One even said that the U.S. Fed chair was just as much of an “enemy” as Chinese President Xi Jinping.
….My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?
— Donald J. Trump (@realDonaldTrump) August 23, 2019
As usual, the Fed did NOTHING! It is incredible that they can “speak” without knowing or asking what I am doing, which will be announced shortly. We have a very strong dollar and a very weak Fed. I will work “brilliantly” with both, and the U.S. will do great…
— Donald J. Trump (@realDonaldTrump) August 23, 2019
Saying the Fed “did nothing” left some to wonder if the president understood that Powell was not giving a policy speech today. He spoke at Jackson Hole, an economic symposium.
That tweet set the stage for the stock market’s tumble. The Dow Jones Industrial Average, S&P 500, and Nasdaq closed down 2.37%, 2.59%, and 3.00%, respectively.
Investors shouldn’t look for any relief on the trade war front coming soon. Following the closing bell, Trump confirmed Wall Street’s worst fear by tweeting that he will raise tariffs on even more Chinese goods.
…unfair Trading Relationship. China should not have put new Tariffs on 75 BILLION DOLLARS of United States product (politically motivated!). Starting on October 1st, the 250 BILLION DOLLARS of goods and products from China, currently being taxed at 25%, will be taxed at 30%…
— Donald J. Trump (@realDonaldTrump) August 23, 2019
…Additionally, the remaining 300 BILLION DOLLARS of goods and products from China, that was being taxed from September 1st at 10%, will now be taxed at 15%. Thank you for your attention to this matter!
— Donald J. Trump (@realDonaldTrump) August 23, 2019
Click here for a real-time Dow Jones Industrial Average chart.
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