Trump’s blistering attacks on Fed Chair Jerome Powell sent markets into a tailspin, with major indices plummeting over 2%. His demand for “immediate” rate cuts and calling Powell a “major loser” spooked investors, triggering a Treasury bond selloff and sending gold prices soaring to $3,400. The market chaos reflects deeper fears about Fed independence and political interference. The drama between Trump and Powell shows no signs of cooling – and that’s exactly what has Wall Street worried.
A wave of market turmoil swept through Wall Street as President Trump released his latest verbal assault on Federal Reserve Chairman Jerome Powell. Major indices plummeted, with the Dow Jones dropping 2.4%, the S&P 500 falling 2.3%, and the Nasdaq sinking 2.5%. The selling frenzy wasn’t limited to stocks – even traditionally stable Treasury bonds took a beating. Long-term Treasury yields reached concerning levels, with the 30-year yield hitting 4.9%.
Trump’s demand for “immediate” rate cuts and his public labeling of Powell as “a major loser” sent shockwaves through the financial community. The president’s social media tirade, comparing Powell unfavorably to the European Central Bank, didn’t exactly calm nerves. Neither did his bizarre accusation that Powell somehow helped Biden’s election chances with pre-2020 rate decisions. Treasury Secretary Bessent warned that market turmoil risks could escalate if Powell were to be removed.
The market reaction was swift and brutal. Gold prices shot up to an eye-popping $3,400 per ounce as investors scrambled for safety. The U.S. dollar – usually a reliable haven – slumped to a three-year low. The widening bid-ask spreads across multiple assets signaled deteriorating market liquidity. So much for stability.
What’s really got Wall Street spooked isn’t just Trump’s rhetoric – it’s the precedent. After watching Trump remove various agency heads, from postmasters to EPA chiefs, investors are genuinely worried about Powell’s job security. Legal experts say forcing Powell out would break nearly a century of precedent, but that hasn’t stopped the speculation.
The whole mess is complicated by Trump’s tariff policies, which Powell warns could spike inflation and slow growth. Talk about being caught between a rock and a hard place – the Fed can’t cut rates to boost growth without potentially making inflation worse. Markets hate this kind of uncertainty, and it shows.
The situation has created a perfect storm of market instability. Powell’s trying to maintain the Fed’s independence and make decisions based on economic data, not political pressure. But with Trump’s constant barrage of criticism and threats, investors are increasingly skeptical about the Fed’s ability to remain autonomous.
One thing’s clear – this financial drama isn’t ending anytime soon.
