Record Bull Market Poised to Run Further as Trump Frets Over Fed

New York (Aug 22) With the Standard & Poor's 500 Index poised to set a new record Wednesday for the longest bull market in U.S. history, Wall Street analysts say there's no apparent reason it can't run further. The Federal Reserve's rate increases since 2015 are moving too gradually to hold it back.

Trump told Reuters this week that he was "not thrilled" with the Fed's rate increases under Chairman Jerome Powell, his own appointee, and that he should be "given some help" by the central bank as he threatens China with a trade war that has weighed on stock-market sentiment.

But Eric Donovan, a managing director at the brokerage firm INTL FCStone in New York, says the Fed's rate hikes are merely a sign of a strong economy: Inflation is picking up but still moderate, unemployment is low, the dollar is buoyant and stocks continue to climb even as borrowing costs rise.

"The market is applauding," Donovan said in a phone interview. "It's a sign that all is going well."
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The S&P 500  has rallied 18% in the past 12 months, closing Tuesday near a record high, even as the Fed has raised rates to the highest levels since the financial crisis of 2008. The U.S. unemployment rate is at 3.9%, close to an 18-year low, and inflation is running right around the central bank's target of 2%.

Yet investors are jittery over trouble spots in the global economy, such as Trump's threats to impose more tariffs on Chinese imports to reduce the trade deficit; already, reports have surfaced of U.S. consumers facing higher costs, and some American exporters have complained they're suffering from retaliatory tariffs erected by China's leaders.

Fed officials fret that a full-blown trade war could put the brakes on global economic growth, in turn prompting businesses to delay plans for expansion or purchases of new plants and equipment. U.S. gross domestic product, which expanded at a 4.1% pace in the second quarter, is projected to slow during the second half.

TheStreet