Turmoil in Washington, D.C., has caused unnecessarily drastic declines in the stock market in recent weeks, UBS’ Art Cashin told CNBC on Friday.
“I think we lost maybe a couple of thousand points that we didn’t need to because of the disruptions that we saw,” including the ongoing government shutdown and President Donald Trump’s attacks on the Federal Reserve, the longtime trader said on “Power Lunch.”
“A little more quiet in Washington” may have allowed the major averages to climb more steadily as routine year-end selling tapered off, said Cashin, who is director of floor operations for UBS Financial Services at the New York Stock Exchange.
Trump continued his rebuke of the Fed on Tuesday, criticizing the central bank for raising interest rates “too fast” after its latest hike. The remarks led to a Wednesday statement from a White House advisor that Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin, both Trump appointees, were not at risk of being fired.
“The president doesn’t seem to realize that the more he talks about what the Fed should do, the more that inhibits the Fed from doing it because they don’t want to look subservient to what’s going on. So that’s a bit of a problem,” Cashin said.
Jack Bouroudjian, chief economist, co-founder and director of the Universal Compute Exchange, agreed with Cashin, telling CNBC that the only thing investors really need to worry about in 2019 is “if the Fed loses its independence.”
“Then all bets are off,” Bouroudjian said on “Power Lunch.” “Other than that, I think that we’re looking at very constructive action.”
The trading expert noted that the stock market seems to be forming a V-shaped bottom, which tends to mean that stocks are mispriced at the height of the selling.
“This V-shaped bottom is going to catch a lot of people by surprise, but people are going to end up looking at this market 3[,000] or 4,000 points away from that V-shaped bottom and saying ‘Oh, my goodness, I think I missed it,'” he said.
“One of the things people forget is that when President Trump came into office, the S&P [500 index] was at 2,100. We have seen this market move considerably ever since he came in,” Bouroudjian continued. “So taking a little froth out of the market and getting down to these levels is probably the best and healthiest thing we could possibly ask for.”
Stocks teetered at the close on Friday, the second-to-last trading day of 2018. The Dow Jones Industrial Average and the S&P 500 were off by less than 1 percent after seeing larger intraday declines, while the Nasdaq Composite gained less than one-tenth of 1 percent after falling earlier in the day. All three indexes are down for the year.