Trump blames the Fed and Democrats for the plummeting manufacturing activity   

03 October 2019 : President Trump was fast to blame the Fed Chair Jerome Powell on falling manufacturing activity, calling the Fed “pathetic”. A day later he accused the Democrats impeachment inquiry of being responsible for the market sell-off.  For Trump, he always associates the rise in equity markets with his policies, but never the losses.

In behavioral finance, that’s what we call Self-Attribution bias. This bias refers to an individuals’ tendency to attribute successes to personal skills and failures to factors beyond their control. While it’s true that US equities have benefited mostly from tax reforms over the past two years, “thanks to President Trump”, it's now not the impeachment inquiry nor the Fed driving equities lower, but the trade war which has been driven by President Trump himself.

That’s why next week’s US-China trade talks will be of extreme importance to financial markets. A resolution or interim deal is needed to prevent further turmoil.

More US data

Before the Sino-American trade talks resume, investors will be cautiously monitoring upcoming US data. The key economic figures to look at are today’s ISM non-manufacturing number and tomorrow’s non-farm payrolls. If the contraction in manufacturing activity translates to weakness in the far larger services sector, then it’s time to get seriously worried. As we know the main driver of the American economy is its consumer, and two-thirds of consumer spending is on services, such as housing and healthcare. Any cracks in that sector suggest the US economy is getting closer to falling into recession. 

Source: FXTM Chief Market Strategist, Hussein Sayed

Reporting for EasyKobo on Thursday , 3 October 2019 in Lagos, Nigeria

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