US Stocks and Dollar Fall Amid Trump’s Criticism of Fed Chair Powell

US Stocks and Dollar Decline Amid Fed Chair Criticism

US financial markets experienced a sharp downturn after President Donald Trump publicly criticized Federal Reserve Chair Jerome Powell, calling for immediate interest rate cuts. Trump’s comments, made via social media, have intensified concerns about the Federal Reserve’s independence and the broader economic outlook.

Trump’s Criticism of Powell

In a social media post, Trump labeled Powell as a ‘major loser’ and accused him of being too slow to respond to economic developments. The president urged the Federal Reserve to lower interest rates ‘pre-emptively’ to stimulate the economy. Trump warned of a potential economic slowdown if Powell did not act promptly, stating, “”There can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW.””

This is not the first time Trump has targeted Powell, whom he appointed during his first term. However, the intensity of the recent criticism has raised concerns about the politicization of the Federal Reserve, which is traditionally an independent institution.

Market Reactions

The president’s remarks triggered a sell-off in US stocks and the dollar. The S&P 500, which tracks 500 of the largest publicly traded companies in the US, fell by approximately 2.4% on Monday. The Dow Jones Industrial Average dropped 2.5%, while the Nasdaq fell more than 2.5%. Year-to-date, the S&P 500 has lost around 12% of its value, the Dow Jones is down 10%, and the Nasdaq has declined by 18%.

The dollar index, which measures the strength of the US dollar against a basket of currencies, fell to its lowest level since 2022. Typically considered a safe-haven asset during times of market turmoil, the dollar has not been immune to the recent turbulence. Interest rates on US government debt also rose as investors demanded higher returns for holding Treasury securities.

Global Market Impact

The ripple effects of the US market downturn were felt globally. Japan’s Nikkei 225 and Australia’s ASX 200 both fell by 0.1% on Tuesday morning, while Hong Kong’s Hang Seng index dropped by 0.5%. In contrast, gold prices surged to record highs as investors sought safer investment options. Spot gold crossed the $3,400 per ounce mark for the first time, highlighting its status as a reliable asset during economic uncertainty.

Concerns Over Fed Independence

Analysts have expressed concerns that Trump’s criticism of Powell could undermine the Federal Reserve’s independence. Thierry Wizman, a global currency and rates strategist at Macquarie, noted, “”The market is okay with rates coming down. What the market is not okay with is having the president or politicians tell the Fed that the rates need to come down.””

Barclays strategist Themistoklis Fiotakis warned that the notion of Fed independence being at risk carries significant consequences for the dollar and the global financial system. “”The risks to the dollar are too large to ignore,”” Fiotakis said in a note to clients.

Potential Legal and Economic Implications

Trump’s escalating rhetoric has also raised questions about whether he might attempt to remove Powell from his position. While Treasury Secretary Scott Bessent has cautioned that such a move could lead to financial market turmoil, other advisers, including Kevin Hassett, have indicated that the White House is considering its options.

If Trump were to pursue Powell’s removal, the matter could end up in the Supreme Court, according to Ian Lyngen, an interest rate strategist at BMO Capital Markets. “”At a moment in which the Administration has already instilled ever-higher levels of uncertainty into the economic outlook, any attempt to remove Powell will add to the downward pressure on U.S. assets,”” Lyngen wrote.

Historical Context

This is not the first time Trump has clashed with Powell. In 2019, Trump publicly questioned whether Powell was a bigger ‘enemy’ to the United States than Chinese President Xi Jinping. Despite his criticisms, Trump ultimately refrained from removing Powell during his first term. Powell was reappointed as Fed Chair by President Joe Biden, with his current term set to end in May 2026.

Outlook for Investors

The ongoing tension between Trump and Powell adds another layer of uncertainty for investors already grappling with the economic impact of tariffs and a potential recession. Analysts suggest that market participants will closely monitor any further developments, particularly regarding the Federal Reserve’s policy decisions and its independence.

As the situation unfolds, safe-haven assets like gold are likely to remain attractive to investors seeking stability amid economic and political uncertainty.