Trump’s latest comments came as markets sold off sharply, with the Dow Jones Industrial Average dropping more than 800 points on Wednesday. Market commentators cited various factors that contributed to the sell-off, including fear that the Fed will raise interest rates aggressively and that escalating trade tensions between the U.S. and China will drive up business costs.
Frenkel said he didn’t think the sell-off had anything to do with rising interest rates.
“I believe that the rising rate environment is a matter of fact. There is nothing new over there, it was completely anticipated, and, in fact, I can tell you now that there will be another rate hike, most likely later this year,” he said.
Instead, he pointed to the “trade skirmishes” between the U.S. and China that, he said, were spilling over all other markets.
“What it tells you (is) that the two giants of the world economy, China and the United States, do not agree with each other,” he said. “And we’re passengers on this airplane and the two co-pilots are fighting. How would you feel? You will fasten your seat belt, you will be nervous and that’s very bad for everyone.”
Ultimately, Frenkel said he expected a compromise to happen between Beijing and Washington. The issue, however, is what kind of damage will happen along the way, he said: “So, yes, long term optimism, short-term challenges.”