Trump: "If You Want Stocks To Fall, Vote Democrat"

After another round of discouraging US-China trade headlines on Monday hammered US stocks further into the red for the year, President Trump chimed in on Twitter early Tuesday to offer a new narrative to explain the "shocktober" selloff. Shifting his criticism away from the Federal Reserve, Trump noted that "the Stock Market is up massively" since the 2016 election, and assured nervous retail investors that stocks were merely "taking a pause" ahead of the Nov. 6 midterm vote.

But if Democrats win, investors will have good reason to panic, as the they pursue their "Venezuela" agenda of unwinding the Trump tax cuts (which have been credited for helping goose corporate earnings, helping to power the rally in 2018) and opening America's borders.

Trump has a point here, as most analysts would attest. If Democrats retake both the House and the Senate (which is, to be fair, an unlikely scenario given the number of red state Democratic senators up for reelection) they would almost certainly attempt to unwind the fiscal stimulus that has, in theory at least, helped drive the rally. But, realistically, Trump is probably screwed either way. Because, even as Trump's criticisms have inspired the market to shift its expectations for the course of Fed rate hikes, Fed Chairman Jerome Powell is apparently determined to move ahead with Fed hikes. Meanwhile, the unwinding of the Fed's balance sheet continues unabated, as Morgan Stanley's Mike Wilson pointed out on Monday.

Morgan

And, in what was an unprecedented move for Trump - whose fondness for quoting economic data and market stats has been well documented since his inauguration - Trump again acknowledged the problem posed by the Fed in a second tweet where he quoted Wells Fargo analyst Scott Wren, who recently published a research note predicting that S&P 500 could rebound back to the record-highs above 2,900 if the Fed would start talking "a little more dovish."

As Mick Mulvaney and Larry Kudlow have both argued in their defenses of the president's angry rhetoric toward the "politically impartial" Fed, it seems the president's anger is justified.

Meanwhile, we wonder what happens one Trump realizes that all that needs to happen for the Fed to launch QE4 is for stocks to really crash... will Trump then pull a U-turn and demand for the Fed to hike rates to 10%?