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US stock markets fell again on Monday as Donald Trump continued attacks against the Federal Reserve chair, Jerome Powell, who the US president called “a major loser” for not lowering interest rates. “There can be a slowing of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW,” Trump wrote on social media.
In recent days, Trump has amped up attacks against the Fed chair, pushing Powell to lower interest rates to offset the inflationary impacts of the new tariffs. Trump is pressuring the Fed to cut rates, likely to appease the stock market, which plummeted after he announced his newest slate of tariffs. But Wall Street isn’t taking the bait and appears to be reacting in opposition to Trump’s attacks against Powell and the independence of the US central bank.
The Dow ended the day down 2.5%, while the tech-heavy Nasdaq Composite fell over 2.5% down and the S&P 500 fell 2.4%. Former tech stocks favorites including Tesla and Nvidia lost ground, while the value of the dollar fell to multiyear lows against most major currencies. Stock markets had recovered the losses they endured after Trump rolled out his “liberation day” tariffs proposals, which would have imposed huge levies on all of the US’s trading partners. But almost all the gains made in the stock market following Trump’s announcement of a 90-day pause of his so-called reciprocal tariffs have been erased amid these new jabs against Powell.
Powell, known to be extremely measured in his public remarks, has in recent weeks spoken out about Trump’s tariffs and warned that they may lead to a “challenging scenario” for the Fed, implying that the Fed has no plans to cut interest rates anytime soon: “Tariffs are highly likely to generate at least a temporary rise in inflation. The inflation effects could also be more persistent,” Powell told reporters on 16 April.
US inflation peaked at 9% in June 2022 but has slowly come down over the last few years, largely due to the Fed’s careful adjustment of interest rates. The Fed has set its inflation rate target at 2%. Powell often refers to the central bank’s “dual mandate” – to keep inflation in check while maximising employment. Higher interest rates can bring down prices, though it can come at the risk of higher unemployment. Over the last few years, the Fed has been able to bring down inflation while keeping the unemployment rate relatively low, around 4%. Last month, inflation cooled to 2.4%, though the most recent government figures do not account for the Trump tariffs.
The Fed has long been treated as a nonpartisan, nonpolitical federal agency, though Trump has recently floated the idea of terminating Powell, whose term is up in May 2026. “Powell’s termination cannot come fast enough!” Trump wrote on social media last week.
Such a move would be unprecedented and would likely put Wall Street into a further tailspin. In an interview with CNBC, Krishna Guha, the vice-chair of Evercore ISI, an equity research firm, said that there would be a “severe reaction” from markets if Trump fires Powell. “I can’t believe that’s what the administration is trying to achieve,” Guha said.
It’s also unclear whether Trump has the authority to remove Powell from his post. The supreme court is currently hearing a case that could give Trump more power to fire federal officials before their terms are up, though it’s unclear whether that could reach the Fed. Last week, Powell emphasized the importance of the Fed’s independence from political forces: “Our independence is a matter of law,” Powell said. “We serve very long terms, seemingly endless terms, so we’re protected by the law.”
But that doesn’t mean the Trump administration isn’t trying. On Friday, White House economic adviser Kevin Hassett told reporters that the administration “will continue to study” if they can legally fire Powell.
Fed officials meet monthly to discuss potential changes to the interest rate. The next meeting between officials will take place 6 and 7 May.
https://linkedin.com/posts/joerg-wuttke-8a10ab8_how-a-dollar-crisis-would-unfold-activity-7318366116429398017-rEFwWorrisome possibility:
„.. Foreigners own $8.5trn of government debt, a bit under a third of the total; more than half of that is held by private investors, who cannot be cajoled by diplomacy or threatened with tariffs. America must refinance $9trn of debt over the next year. If demand for Treasuries weakens, the impact will quickly feed through to the budget, which, owing to high debts and short maturities, is sensitive to interest rates.
What would Congress do then? When markets collapsed during the global financial crisis and the pandemic, it acted forcefully. But those crises required it to spend, not to impose cuts. This time it would need to take an axe to entitlements and raise taxes quickly. You need only consider the make-up of Congress and the White House to see that the markets might have to impose a lot of pain before the government could agree on what to do. As America dithered, the shock could spread from Treasuries to the rest of the financial system, bringing defaults and hedge-fund blow-ups. That is the sort of behaviour you would expect in an emerging market……“
https://economist.com/leaders/2025/04/16/how-a-dollar-crisis-would-unfoldA currency is only as good as the government that backs it. The longer America’s political system fails to grapple with its deficits or flirts with chaotic or discriminatory rules, the more likely will be a once-in-a-generation upheaval that pushes the global financial system into the unknown. Wherever things settled, the greenback’s diminished role would be a tragedy for America. True, some exporters would benefit from a weaker currency. But the dollar’s primacy reduces the cost of capital for everyone, from first-time homebuyers to blue-chip firms.
Biting the hand that funds
The world would suffer because the dollar has no equal—just pale imitations. The euro is backed by a big economy, but the euro zone does not produce enough safe assets. Switzerland is safe but small. Japan is big, but has its own vast debts. Gold and cryptocurrencies lack state backing. As investors tried one asset and then another, the hunt for safety could bring about destabilising booms and busts. The dollar system is not perfect, but it provides the stable ground on which today’s globalised economy is built. When investors doubt America’s creditworthiness, those foundations are in danger of cracking.
The U.S. dollar is an early casualty of President Donald Trump’s us-against-the-world trade war. The dollar has lost almost 10 percent of its value since Inauguration Day, with more than half of decline coming this month after the president’s decision to lift taxes on imported goods to their highest level since 1909.
The weaker dollar — now near a three-year low against the euro — is bad news for Americans traveling abroad and could also aggravate inflation by making foreign goods more expensive. U.S. exporters, however, should gain.
“The administration’s approach to policy and its lack of transparency in terms of motivations have all led to a distinct sense of unease in financial markets,” said David Page, head of macro research for Axa Investment Managers in London, which manages $1 trillion in investments. “It doesn’t look like what we have been used to in terms of well-thought-out policy.”
Those concerns last week sent investors fleeing from the dollar and U.S. government securities, historically a haven during financial crises. This week, after markets quieted, Treasury Secretary Scott Bessent dismissed those concerns. In an interview Monday with Bloomberg Television, he said there was “no evidence” that foreign investors were abandoning U.S. assets, saying they had been active participants in recent auctions of government debt.
“The dollar is incredibly entrenched in the global financial system in ways that no other currency is. Importing, exporting, borrowing, hedging, using the dollar for collateral, all of these things that major actors in the international economic system use the dollar for, would be so difficult to modify,” said Paul Blustein, author of “King Dollar: The Past and Future of the World’s Dominant Currency.”
As the president’s enthusiasm for tariffs made the United States look riskier, investments in other markets became more attractive. In Europe, the German government last month abandoned a constitutional borrowing limit and made plans to spend heavily to spur the economy and fund a military buildup, raising growth prospects. China encouraged higher consumer spending to better balance its export-heavy economic model. And Japanese 10-year government debt offered its highest return in 15 years.
Recent gains by the Swiss franc, the euro, Japanese yen and gold, which is up more than 7 percent in the past five trading days, support the idea that investors are looking for new ways to ride out the turmoil unleashed by the president.
Yet for major institutional investors, giving up on the dollar is not feasible. The $28 trillion Treasury market is the world’s largest and most liquid, meaning that investors can quickly sell their holdings if they need to raise cash. In contrast, there are only $1.4 trillion in German government bonds outstanding. Alternative currencies likewise fall short. The Chinese yuan is assuming a greater role in global commerce. But the Chinese government does not allow capital to move freely across its borders, meaning investors could find their funds trapped.
The euro also is handicapped. Nations that use the euro share a central bank in Frankfurt, which governs the zone’s monetary policy. But they lack a common fiscal authority akin to the U.S. Treasury and a common bond market.
Even if the era of global dollar supremacy survives the trade war, the currency’s short-term outlook might be poor. Trump’s imposition of widespread tariffs has made a recession more likely, economists say, which could hurt stock prices and prompt the Federal Reserve to cut interest rates. That would make investing in dollar-based assets less appealing.
When LC tilting growth beat value for 15 years, many claimed it's not an accurate comparison instead of admitting their selection did that.That is not an accurate comparison. VWINX focuses on income (bonds) as the primary objective, and capital appreciation (stocks) as the secondary objective. Holding more long bonds is Wellington choice. FPACX is the other way around, and cash is treated as their tactical position.
Why would you think this time is different than others times where I posted that I sold before major meltdowns.I think minor inconsistencies in FD1000's posts were probably just innocent errors.
After all, why would a rational person seek to impress a bunch of strangers on the internet?
Attempts to do so would be utterly absurd!
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