Quote:
Originally Posted by luka
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In a twisted way, Trump is correct.
- Employment numbers are good
- Since unemployment is low, this puts pressure on competitive wages, driving wages up
- This implies that the economy is heating up, resulting in inflation.
- Inflation implies federal reserve intervention via an increase in interest rates
- This implies that weighted cost of capital for companies increases
- Investors see this as a cost and therefore can affect profits
- Results are that Equity markets slack off
All of the above were simply due to the perception on how the tax breaks would work. Sounds weird, but the argument has merit (probably the only argument that Trump has with merit).
If you add into the equation that stocks have been very hot lately, a correction was due.