Today, back in the office, we realize that 2018 is cruelly ending with the stock market in bear territory—loosely defined at 20% down from the highs. About 6 trillion in shareholder value has been erased globally. U.S. and China trade wars are in full effect, the Government is still shut down, Democrats and Republicans are at each other’s throats and the Fed—ignoring Trump’s bullying— is sticking to their plan of raising interest rates.
Treasury Secretary Steven Mnuchin freaked out (yes, that’s a sophisticated Wall Street term) by tweeting that he contacted the CEOs of the nation’s six largest banks to casually let the them know that everything is fine and dandy. He just wanted to drop them a friendly line to ask about their holiday season and inquire if they may be insolvent or have any other problems that could potentially lead to a second financial crisis. Mnuchin happily tweeted from his Cabo vacation with his wife that “they have ample liquidity availability for lending to consumer, business markets and all other market operations.” This is the equivalent of saying, “There’s nothing to look at. Don’t worry. Everything is fine. We got it. It’s all be good; I promise.” If that wasn’t sufficiently enough to frighten investors, Mnuchin added that he will assemble the “Plunge Protection Team,” a group of super-hero regulators comprised from the senior ranks of the Securities and Exchange Commission (SEC), Commodities Futures Trading Commission (CFTC), Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) “to assure normal market operations.” We could give him the benefit of the doubt that he was simply calling the CEOs and convening the “Plungers” to gauge their thoughts on how the banks are faring in this environment; however, it did not come across as calming and had the complete opposite effect.
It might be helpful to share a little background of how we got here, what’s happening and what it could mean for your career and job search. Since the financial crisis, the Federal Reserve Bank has kept interest rates at historically artificially low levels and flooded the market with capital to promote lending and liquidity. This was supposed to be a temporary solution and the goal was to help bail out the U.S. from the financial crisis and print huge sums of money to make it happen. This was effective in averting another Great Depression, but critics warned that this strategy could distort the real marketplace and have serious long-term consequences. Now, 8-10 years later, it looks like the critics may be correct. Put aside this boring economics stuff, here is what it means for your career.
The pessimistic version is that the trade wars will continue indefinitely, the Fed will remain steadfast and increase interest rates, global stock and bond markets will fall, companies will lose confidence and stop hiring and start laying off people. We will enter a recession and the job market will be volatile and performance lackluster—at best. The sudden and vicious turn from stocks gaining to plummeting—surrounded by all the angst and drama—creates uncertainty about the future. This will create a challenging environment for job seekers. This chaotic backdrop will frighten corporate executives and employees alike into inertia. Business leaders are not interested in starting new projects, hiring people and taking risks in this type of environment. It is very likely that the faucet will be turned off on hiring and people will have to worry about holding onto their jobs.
Please don’t despair; we have an optimistic alternative.Trump will return to his campaign message and promises made at the beginning of his presidency. A key reason for the stock market and employment hitting record highs was due, in large part, to the positive mood instilled in corporate America. Trump’s platform pushing for more jobs, deregulation, lower taxes, strong negotiations with China and other countries and a business-friendly administration resonated with corporate executives. They felt empowered and were excited to hire and grow their businesses.
Hopefully, Trump will listen to the the jarring message from the stock market and tone down his rhetoric and seemingly erratic behavior (and we will grant him that his actions are orchestrated as negotiating tactics). He will work with—rather than publicly feud—with China to come to a mutually benefiting solution over trade and tariffs, as their stock market has been crushed too. If Trump relents on his attacks on Fed Chair Jerome Powell, then rates may remain flat or cut back again.
These and other actions may send a signal to Wall Street and investors that things are back to normal (well, as normal as possible), the adults are in control, we are not driving off a cliff and the markets and the overall corporate and investor mood will dramatically improve. If this happens, then the companies will start hiring again and continue what they were doing for the last two years, which resulted in the highest employment rates since the 1960s.
Whichever way this goes, you will need to be mentally prepared for a roller coaster ride start to 2019.