Tremors on Wall Street

The spectacular fall of the Dow Jones Industrial average on Monday, while not triggering a financial crisis, warns of the consequences of “Trumponomics.”

Despite the Dow’s spectacular fall on Monday, which dropped 1,175 points, or 4.6 percent which dragged down the European Stock Exchange, the event should be analyzed with caution and without falling into the trap of prematurely triggering alarm bells. On Tuesday, when the Dow opened high, a preliminary analysis of the descent offered an explanation that dismissed this catastrophic temptation entirely.

Automatic sale orders played an important role in the falling stock prices as they are a mechanism that amplifies operations and masks the natural movement of the market.

The main reason for the restlessness of the stock exchange, as reflected in the decline from the previous week, is doubt about monetary policy, and specifically doubt raised by the rate hikes set by Janet Yellen. According to the feeling of one part of the market, improving growth and employment rates, together with Trump’s economic policies, will enable a rise in inflation which will force the Federal Reserve to raise rates more quickly.

In the face of Monday’s events, it must be made clear that we are not looking at a financial crisis; the basic conditions of the American and global economies are the best they have been in the last four years, and they do not therefore signify a systematic deterioration or collapse in the markets. There are neither economic nor, given abundant liquidity in all markets, financial reasons to fear an imminent financial crisis.

However, it is still a fact that, while Trump’s economic policies favor the rejuvenation of the economy, his exchange rate policies favor the appearance of sporadic tremors in the financial climate. It is therefore necessary to pay attention to the course of the American economy. Although there is no reason for alarm, Trump’s policies are pushing the economies of both the U.S. and the wider world toward a serious imbalance.