President Trump has continued to voice his dissatisfaction with Federal Reserve Chair Jerome Powell. But should the president go as far as attempting to fire Powell, strategists say it would add to the pressure on US stocks.
Michael Goosay, Principal Asset Management’s chief investment officer of global fixed income, told Yahoo Finance that such a move would bring the central bank’s independence into question. This would “further put downward pressure on the confidence that foreign investors have in investing in US dollar assets,” he said.
Last week, reports swirled that Trump had been discussing possibly firing Powell. Trump himself told reporters at the White House on April 17, “If I want [Powell] out, he’ll be out of there real fast, believe me.”
On Monday morning, Trump posted on Truth Social, “… there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW.”
The potential ouster of the Fed chair is just one factor dragging down the market this week. Stocks were heavily in the red on Monday as investors continued to worry about the impact of Trump’s tariffs and AI growth at Big Tech companies. The S&P 500 (^GSPC), Dow Jones Industrial Average (^DJI), and Nasdaq Composite (^IXIC) all closed down more than 2%.
Meanwhile, investors’ disinterest in US-backed assets — a recent theme amid the trade war tensions — continued. The US Dollar Index (DX-Y.NYB) was down about 1% to hit its lowest level in three years. Meanwhile, the 10-year Treasury yield pressed higher, adding 5 basis points to hover just below 4.4%.
“The dollar, the bond market, and equity markets are taking it on the chin, some of which was undoubtedly exacerbated by the comments directed at Chairman Powell,” FS Investments chief market strategist Troy Gayeski told Yahoo Finance.
At close: April 21 at 5:13:02 PM EDT
^GSPC ^DJI ^IXIC
In a note on Monday morning, Renaissance Macro’s head of economics Neil Dutta wrote that getting rid of Powell in dramatic fashion would “upset the bond market.”
“Risk premiums would rise sharply as investors question the central bank’s independence and longer run interest rates would surge,” Dutta wrote.
This in it of itself could be a headwind for stocks as interest rate volatility has often coincided with large sell-offs in equities. Add in the slew of other headlines that have been sending stocks lower as of late, and the result is an uncertain outlook for investors.
“Trump’s Tariff Turmoil has put the world on edge,” Yardeni Research president Ed Yardeni wrote in a note to clients on Monday. “A new world order may be the ultimate result, but for now we’ve got the New World Disorder, leaving everyone scrambling to adjust to Trump’s unpredictable policy pivots. The economic fallout is uncertain.”
