Donald Trump’s recent calls for the Fed to cut interest rates immediately have triggered a great deal of volatility in our markets. Along with that, gold prices have spiked past $3,400 a troy ounce and Bitcoin has jumped above $88,000. Growing trade tensions and the possible ousting of Jerome Powell are all creating frayed nerves across investors. As a consequence, many investors are moving into safe-haven assets.
Trump claimed falling energy and food prices could take inflation off the table, calling for interest rates to be cut now. Specifically, he demanded Jerome Powellʼs head on a platter for his “wait and see” approach to interest rates.
With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a slowing of the economy unless Mr. Too Late, a major loser, lowers interest rates, now. - Donald Trump
At the same time, gold prices have hit all-time highs, as traders look for safe-haven assets amid financial market volatility. This flight to safety is driven entirely by fear of Trump’s trade war and a predictable long-term downturn exacerbated on the global economy.
Jerome Powell’s concern that inflation would be raised by tariffs just adds to the confused milieu. Far from America’s salvation, Trump’s trade war—characterized by tariffs-for-everybody and protectionist tantrums—has thrown international trade into disarray.
The possible firing of Fed Chairman Jerome Powell by the White House is another huge sticking point. This move, which some analysts warn may set off severe market backlash.
It would be a huge, huge shock. - Bilal Hafeez
As a result, the market’s reaction to these developments has been swift and decisive. Investors are exiting risk assets such as bitcoin and crypto because of the overwhelming uncertainty.
Bitcoin and gold are surging in tandem this morning as the market digests yet another shock move from the U.S. president Donald Trump—this time, an apparent outright threat to fire Federal Reserve chair Jerome Powell. - Nic Puckrin
A “U.S. dollar confidence crisis” could be on the horizon if that plays out. Some analysts are going so far as to recommend an “apocalyptic scenario” for the markets.
Overall, it would almost be like an apocalyptic scenario for the market. - Bilal Hafeez
Trump's dissatisfaction with Powell is evident, as he believes Powell's termination "cannot come fast enough." This unusual tension between the executive branch and the Federal Reserve is just adding to the uncertainty that has already thrown the markets in turmoil.
Collectively, the convergence of these factors indicates a complicated and somewhat unpredictable economic landscape. Rarely has one man’s policy declarations and pronouncements had such a direct impact on market behavior, thus presenting both extraordinary opportunity and risk to investors.
