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Fed Study Suggests Trump May Have Fed to Thank for Stock Rally

  • Central bank reaction key to tax cut’s effect, paper shows
  • This time may be different due to increased caution on rates
Bloomberg business news

Key Drivers of the Rally in Global Equities

As President Donald Trump takes credit for record-high stock prices, a new study published by the Federal Reserve suggests he may want to thank the U.S. central bank.

Tax cuts were bad news for the stock market in the three-decade era ushered in by then-Fed Chairman Paul Volcker, who took office in 1979. That’s because they tended to raise anticipation that Fed officials would offset them with interest-rate increases, according to the paper. Its authors concluded that one of the reasons stocks have rallied this time around may be that U.S. central bankers have adopted greater caution toward tightening in the wake of the 2008 financial crisis and subsequent slow economic recovery.