Silke Mayr US stock markets and the dollar took a sharp dive following President Donald Trump’s latest attacks on Federal Reserve Chairman Jerome Powell. Trump, who handpicked Powell for the role, lashed out at him on social media, calling him a “major loser” for not cutting interest rates. His harsh criticism has fueled further uncertainty in financial markets already reeling from concerns about his tariff policies and their impact on the economy. Trump’s call for a pre-emptive rate cut comes as market anxiety grows, amplifying worries over the future economic landscape.
Major Indices Tumble Amid Rising Market Concerns
The S&P 500 plummeted by 2.4% on Monday, continuing its downward trend with losses amounting to approximately 12% so far this year. The Dow Jones Industrial Average also saw a 2.5% decline, bringing its year-to-date drop to 10%. The Nasdaq, which has been hit hardest, dropped more than 2.5%, contributing to a nearly 18% decrease since the beginning of the year. This sell-off reflects broader market concerns, particularly about the state of the US economy and uncertainty surrounding the Federal Reserve’s stance on interest rates.
Dollar and Bonds Feel the Heat
The US dollar also suffered as investor confidence took a hit. The dollar index, which tracks the currency against a basket of major global currencies, fell to its lowest point since 2022. Investors flocked to US Treasuries, pushing interest rates higher, as they demanded more substantial yields to offset the perceived risks in the market.
Gold Prices Soar as Investors Seek Safe Havens
In contrast to the stock market and dollar, gold prices surged to new record highs, reflecting growing global demand for safe-haven assets. Spot gold reached a price of $3,400 (£2,563) per ounce, marking an all-time high. Gold is traditionally seen as a secure investment during times of political or economic instability, and with the market turmoil driven by Trump’s remarks and concerns over global trade tensions, investors turned to the precious metal for safety.
Trump’s Tension with Powell: A Long-Standing Issue
Trump’s criticisms of Powell are not new. Throughout his first term as president, Trump frequently criticized Powell, even considering firing him for not lowering interest rates fast enough. His latest outburst followed Powell’s warnings that Trump’s tariffs would lead to higher costs and slow down economic growth. Last Thursday, Trump went as far as calling for Powell’s removal, saying, “Powell’s termination cannot come fast enough.”
The Legal Challenge of Removing Powell
Removing Powell from his position as Federal Reserve Chair would be a controversial move, likely facing significant legal hurdles due to the Fed’s protected independence. Powell has previously stated that he does not believe the president has the legal authority to dismiss him. However, Trump’s team appears to be exploring the possibility of removing Powell, despite the challenges it would present. A senior Trump adviser confirmed on Friday that officials were looking into potential options, although no immediate action has been taken, especially as US markets paused for a trading holiday.
The financial markets’ sharp decline, spurred by Trump’s verbal attacks on Powell and the continued fallout from his economic policies, has left investors on edge. With uncertainty rising, many are looking for safe assets like gold to protect their wealth. As the situation develops, the battle between Trump and Powell will likely continue to influence market movements and investor sentiment.