Financial markets have been extremely volatile over the past few months. The Dow Jones Industrial (DIA) peaked at 26,700 in September. The melt up in financial markets seemed like it would go on in perpetuity. I never thought it was based on earnings growth, just animal spirits and a GOP tax cut. Even the GOP tax cut was not meant to grow the economy. I believe President Trump wanted to ensure the elites kept the bailout money and trillions in stimulus they received during the Obama administration. Spiking the Dow to nearly 27,000 was another one of those gifts.

However, the Fed appears to be removing the punch bowl. Several interest rate hikes and a consistent balance sheet unwind have drained liquidity from financial markets. In October President Trump intimated there was no need for more rate hikes and blamed the September rate hike for causing stock market volatility. The December rate hike sent the Dow even lower.

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