In a double whammy of panic about the fate of the artificial "wealth effect" created thanks to $20 trillion in central bank liquidity, officials at both the White House and Europe's largest hedge fund expressed concerns about the market rout that saw the Dow suffer its biggest point drop in history.
According to Bloomberg, ECB staff "have been in contact with market participants over the current selloff in stocks to gauge if there is any risk to financial stability."
As Bloomberg adds, the latest communications are part of the ECB’s regular interactions with financial institutions and the central bank isn’t yet overly concerned by the global equity rout. The underlying assumption is that "it’s simply a correction because valuations may have become overstretched."
Of course, if the VIX explosion continues, the ECB will be far more worried.
As a result, staff are "watching for signs the downturn might enter a self-reinforcing spiral or spread from equities to bonds."
One worry is that the selloff was triggered by strong U.S. economic data that led to expectations of faster interest-rate increases, a symptom that financial markets are still relying on monetary support, one of the people said.
Meanwhile, across the Atlatnic, White House Spokeswoman Mercedes Schlapp said on Fox that "obviously we’re concerned about setbacks that happened in the stock market" however, she was quick to hedge that "with that being said, we’re looking at the long term strong economic fundamentals."
Seeking to distance the White House from Trump's relentless boasting about every uptick and sudden silence now that stocks have crashed, she instead decided to sound like your typical, worthless sellside analyst, and said that people should focus on "improving fundamentals" instead: "What we’re seeing is a strengthened economic growth, increased wages; we’re focused on the fact that there’s been the lowest unemployment that we’ve seen in a long time, and there’s confidence in our businesses. Consumer confidence is at an all-time high."
As we said last night, the best outcome from all of this is that Trump will probably not tweet about the S&P for a long, long time.