Fed Under Fire: Trump's Powell Firing Threat Sends Markets Tumbling

TLDR

Table of Contents

Federal Reserve Chair Powell is facing market volatility due to Trump’s tariff policies
Trump threatened to fire Powell, saying his “termination cannot come fast enough”
Markets declined with S&P 500 down 1.5%, Dow down 2.7%, and Nasdaq down 2.6%
Powell warned Trump’s tariffs would likely cause “higher inflation and slower growth”
Trump claims Powell is “too late” and should have lowered interest rates sooner

Market uncertainty deepened this week as President Donald Trump escalated his criticism of Federal Reserve Chair Jerome Powell, threatening his job while global markets reacted to ongoing trade and tariff disputes. The clash between fiscal and monetary policy comes as investors struggle to find safe havens in an increasingly volatile environment.

In a Truth Social post on Thursday, President Trump declared that Powell’s “termination cannot come fast enough!” This statement followed Powell’s comments that the Fed would need to “wait for greater clarity” before making any interest rate adjustments, while also warning that Trump’s tariffs would likely create “higher inflation and slower growth.”
During a White House press conference later that day, Trump doubled down on his criticism. “If I want him out, he’ll be out of there real fast, believe me,” Trump told reporters. “I don’t think he’s doing the job. He’s too late. Always too late.”

Trade Tensions Impact Markets

The market response has been decidedly negative. The S&P 500 finished the holiday-shortened week down 1.5%, while the Dow Jones Industrial Average closed 2.7% lower and the Nasdaq Composite fell 2.6%.

Investors have been whipsawed by changing policies and statements regarding international trade. While President Trump has paused his “Liberation Day” tariffs for most countries, the situation with China remains particularly tense.

The uncertainty has hit the tech sector especially hard. New restrictions on artificial intelligence chips have ensnared companies that had fueled much of the previous two years’ market rally.

In a move that surprised many observers, Jensen Huang, CEO of Nvidia, made an unexpected trip to Beijing at a trade group’s invitation. Nvidia, last year’s top performer among the “Magnificent Seven” stocks, saw its shares drop 2.87% amid concerns about export restrictions.

DeVere Group CEO Nigel Green described this development as “a stark example of how the current U.S. trade stance is pushing countries and companies further toward China, not away from it—financially, economically, politically and diplomatically.”

Powell Stands His Ground

For his part, Powell seems unwilling to intervene in markets to calm volatility. During Wednesday’s statements, he indicated that stocks are “doing what they’re supposed to do” and suggested more volatility is likely.

This approach has drawn criticism from the White House, which is concerned that the Fed could be hampered in its ability to support the economy if inflation rises due to tariffs. Powell maintained that policymakers would need to “wait for greater clarity” before making any changes to monetary policy.

According to The Wall Street Journal, Trump has privately discussed firing Powell for months but hasn’t made a final decision about whether to try to oust him before his term ends in May 2026.

The report indicates Trump has spoken with former Fed governor Kevin Warsh about replacing Powell. However, Warsh reportedly advised the president to wait until Powell’s term expires naturally. Treasury Secretary Scott Bessent has also cautioned against early removal.

Investors Seek Safe Havens

The traditional safe haven of bonds isn’t providing the protection investors typically expect during market turbulence. This has complicated efforts to find shelter from the storm.

Other defensive options have performed better both in the past week and year to date. These include utilities and consumer staples sector ETFs, which have shown more resilience than the broader market.

Gold has soared this year and appears likely to remain strong as long as uncertainty persists. Cash options like high-yield savings accounts and money-market funds are also attracting investors looking for temporary security.

Capital Economics’ Jonas Goltermann warns that while the worst may be over “for now,” slower economic growth and greater uncertainty means the hardest-hit assets may not fully recover their previous highs.

“The big picture is that the range of plausible outcomes has widened significantly and, compared to just a couple of months ago, the outlook appears more challenging for ‘risky’ assets and, perhaps, government bond markets too,” Goltermann wrote.

As tensions between the White House and the Federal Reserve continue, investors may need to prepare for extended volatility in the weeks and months ahead.

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