President Donald Trump reacted to the recent market turmoil in a tweet this morning, calling the market’s apparent negative reaction to good news a “big mistake.”
In the “old days,” when good news was reported, the Stock Market would go up. Today, when good news is reported, the Stock Market goes down. Big mistake, and we have so much good (great) news about the economy!
— Donald J. Trump (@realDonaldTrump) February 7, 2018
The stock market’s recent volatility appears to have been sparked by investor reactions to news last week of improving wages and the possibility of higher inflation and higher interest rates.
Breitbart explained the ‘good news is bad news’ dynamic on Friday:
The U.S. economy added 200,000 jobs Friday, and wages saw their biggest increase since the end of the recession. The strength of the labor market, however, appeared to lead to weakness in the stock market.
The stronger-than-expected jobs report is likely to reassure Federal Reserve officials about their plans to raise rates several times this year. In December, Fed officials predicted that they would raise rates three times in 2018. A stronger jobs market, however, raises the potential for a possible fourth rate hike.
“If wage growth continues, that could have an impact on the path of interest rates,” Minneapolis Fed President Neel Kashkari said on CNBC Friday.
The Dow Jones Industrial Average fell by nearly 666 points, or around 2.5 percent, Friday. The Dow rose 5.8 percent in January but declined 4.1 percent for the week, the worst weekly record since 2016. The S&P fell by 2.1 percent, and the Nasdaq Composite declined by around 1.95 percent.
The yield on the ten-year Treasury note rose to its highest level in more than four years. Yields move up as bond prices decline.
Rising pay for workers has focused investor attention on the risk of inflation, which erodes the value of the fixed coupon paid to bondholders.