Financial Markets Face Potential Turmoil Amid Speculation of Trump’s Action Against Fed Chair Jerome Powell

Analysts warn of a significant downturn in both equities and fixed-income securities should former President Donald Trump take decisive measures targeting Federal Reserve Chairman Jerome Powell. Market participants are closely monitoring political developments, as such a move could destabilize investor confidence and trigger a broad-based sell-off across asset classes. The potential confrontation raises concerns about central bank independence and its implications for monetary policy stability during a period of economic uncertainty.

Krishna Guha asks Trump to let Fed’s Powell end his term

Trump has been attacking Powell, asking him to lower interest rates. However, Powell has refused to act and says he is not in a hurry. Trump has shown his frustrations, resulting in him wanting to fire Powell, though it might take time. Kevin Hassett, a White House aide, also said that the president’s team is looking into Powell’s removal from office.

When Powell was asked about this possibility, he said that he doesn’t think the president has the formal power to fire the Fed Chair.

The president could pressure Powell without firing him by making it clear to the public who he wants to name as Fed chair when the position opens up next year. This “shadow Fed Chair” could tell the markets that interest rates will be lowered once Powell is gone. Already, 58%, according to Polymarket, think Powell will be gone by next year.

Krishna Guha advises, “It’s strongly in the administration’s interest to take a deep breath and let Fed Chair Powell run things for the remainder of his term. That’s the best shot at keeping inflation expectations well anchored, keeping bond yields well behaved and allowing the Fed to cut without causing real problems in markets.” 

US markets set for a volatile week

For the second week in a row, the S&P 500, Nasdaq, and Dow Jones will have very rough weeks. Wall Street investors are waiting to see if Trump can reach a tariff deal. 

What will the terms and conditions be if a deal goes through? If there is news of a deal, both the NYSE and the Nasdaq will go into buying mode. However, trade worldwide will greatly affect the stock market this week.

During the week, some big companies will report their earnings. Tesla and Alphabet, the parent company of Google, are two of the “Magnificent Seven” mega-cap companies whose stocks have dropped after two years of stock market dominance. 

Investors are paying close attention to their financial results as they try to figure out what will happen with tariffs that are still being negotiated. In 2025, all seven Magnificent Seven mega-cap stocks are down sharply. 

Alphabet is down about 20%, and Tesla is down 40%. However, these reports could influence their stock surge or drop.

To get an idea of how likely it is that there will be some kind of tariff deal, investors will also listen to what US President Donald Trump has to say. There might be some buying if there are any good comments.

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