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The Herald Scotland
5 days ago
- Business
- The Herald Scotland
Trump amps up pressure on Fed Chair Powell, and investors react
"Certainly the rhetoric is creating volatility and uncertainty among investors," said Jack Ablin, Chief Investment Officer at Cresset Capital, which has $65 billion in assets. "Today was really a microcosm. Earlier in the day, investors were fretting that Trump would fire Powell and we saw rates higher and stocks lower. And then Trump came out and said no, I'm not firing Powell. Lo and behold, bond yields came down and equities went up. So I do think it is creating concern. I think investors would like to see an independent Fed." Stocks closed the day higher, and U.S. Treasury yields were mostly lower. "I talked about the concept of firing him," Trump said to reporters, gathered in the Oval Office where he was meeting with Crown Prince Salman bin Hamad Al Khalifa of Bahrain. "I said, 'What do you think?' Almost every one of them said I should but I'm more conservative than they are.'' More: Trump denies plans to fire Fed Chair Jerome Powell despite what he told Republicans Later, he added, "When we were talking about it I asked, what would you do about that. They all said, we'd fire him.'' Although Trump nominated Powell to helm the Fed in his first term, he has frequently criticized the central bank chief, especially since starting his second term, berating him for not slashing a key interest rate in order to jump-start the economy and lower federal debt payments. Fed watchers are well aware that it's not new for presidents to pressure the central bank. Both Lyndon Johnson and Richard Nixon were known to dislike the Fed chiefs who served during their terms, and to try to pressure their policies, said Steve Blitz, chief U.S. economist at GlobalData. "The difference is that Trump does it in public and believes that doing it in public gives him strength," Blitz told USA TODAY. Blitz and other analysts also believe it's dangerous that Trump is able to sway other lawmakers to his point of view. "He's the first (president) that somehow seems to be able to get the establishment to crater. I don't really understand it. Everyone says they're afraid of him. Are you a patriot or not?" Although Powell's term as Fed chairman ends in 2026, he can stay on as a governor on the Fed board until 2028. Powell has said that he intends to serve out his term, and believes Trump does not have the legal authority to fire him. In a May 22 ruling, a majority of Supreme Court justices signaled that they believe Trump wouldn't be allowed to fire Powell, arguing the Federal Reserve is "a uniquely structured, quasi-private entity" that is different from other independent agencies. The line was part of a Supreme Court opinion allowing Trump to fire two federal labor board members. David Kotok, co-founder of Cumberland Advisors, which has $3.5 billion in assets, points out that the Fed, under Powell's leadership, has capably managed through several crises on its watch, from the pandemic emergency response to the swift resolution of that crisis, to a spate of bank failures in 2023. "That's Jay Powell at work," Kotok told USA TODAY. "To me, the man is a pillar of honesty and leadership and maintains his public demeanor and discipline in the face of an onslaught of verbal abuse which is unnecessary and harmful to the U.S., its image in the world, and to our banking and financial system. The only reason the harm is not evident in the market is because the Fed puts a premium on financial stability." For investors, a perennial question is whether and when markets will react strongly enough to lead politicians to backtrack. One recent example took place in April, after the White House unveiled its shock-and-awe tariff proposals. Investors ditched bonds at the fastest pace in decades, concerned about the impact of those tariffs on the U.S. debt and the economy. Since then, tariff deadlines have shifted frequently. More: The bond market sell-off is more worrisome than the one in stocks. Here's what to know. But investors haven't yet reacted forcefully enough to the notion that Trump will be able to fire, or bully Powell out of a job. That's in part because of a widespread belief that the president will eventually cave, said Blitz, referencing the so-called "TACO" -- Trump Always Chickens Out -- trade. The acronym describes the president's pattern of announcing hefty new tariffs, causing economic shock, panic and stock declines - only to reverse course later with pauses or reductions that create a market rebound. "The market has this idea that he's going to bully and bully and bully, but he'll never actually do it," Blitz said. "But I think this is where the danger lies, which is that Trump pushes to the outer reaches of the universe. People expect the fabric of the universe to snap and push him back to the middle, right? But they don't really understand that he is intent on ripping the fabric of the universe. He keeps pushing and pushing and pushing, softening the opposition every time he does it, and then he will break through."
Yahoo
5 days ago
- Business
- Yahoo
'Ripping the fabric of the universe:' Trump targets Powell, and investors react
President Donald Trump on Wednesday escalated his talk about removing Federal Reserve Chairman Jerome Powell, telling reporters that Republican lawmakers supported firing the central bank chief. While Trump denied having plans to immediately fire Powell, many finance and economic experts say the attacks are damaging to financial markets, and perhaps the U.S. political system as well. 'Certainly the rhetoric is creating volatility and uncertainty among investors,' said Jack Ablin, Chief Investment Officer at Cresset Capital, which has $65 billion in assets. 'Today was really a microcosm. Earlier in the day, investors were fretting that Trump would fire Powell and we saw rates higher and stocks lower. And then Trump came out and said no, I'm not firing Powell. Lo and behold, bond yields came down and equities went up. So I do think it is creating concern. I think investors would like to see an independent Fed.' 'I talked about the concept of firing him,' Trump said to reporters, gathered in the Oval Office where he was meeting with Crown Prince Salman bin Hamad Al Khalifa of Bahrain. 'I said, 'What do you think?' Almost every one of them said I should but I'm more conservative than they are.'' Later, he added, 'When we were talking about it I asked, what would you do about that. They all said, we'd fire him.'' Although Trump nominated Powell to helm the Fed in his first term, he has had the central bank chief in his crosshairs since starting his second term, berating him for not slashing a key interest rate in order to jump-start the economy and lower federal debt payments. Fed watchers are well aware that it's not new for presidents to pressure the central bank. Both Lyndon Johnson and Richard Nixon were known to dislike the Fed chiefs who served during their terms, and to try to pressure their policies, said Steve Blitz, chief U.S. economist at GlobalData. 'The difference is that Trump does it in public and believes that doing it in public gives him strength,' Blitz told USA TODAY. Blitz and other analysts also believe it's dangerous that Trump is able to sway other lawmakers to his point of view. 'He's the first (president) that somehow seems to be able to get the establishment to crater. I don't really understand it. Everyone says they're afraid of him. Are you a patriot or not?' David Kotok, co-founder of Cumberland Advisors, which has $3.5 billion in assets, points out that the Fed, under Powell's leadership, has capably managed through several crises on its watch, from the pandemic emergency response to the swift resolution of that crisis, to a spate of bank failures in 2023. 'That's Jay Powell at work,' Kotok told USA TODAY. 'To me, the man is a pillar of honesty and leadership and maintains his public demeanor and discipline in the face of an onslaught of verbal abuse which is unnecessary and harmful to the U.S., its image in the world, and to our banking and financial system. The only reason the harm is not evident in the market is because the Fed puts a premium on financial stability.' For investors, a perennial question is whether and when markets will react strongly enough to lead politicians to backtrack. One recent example took place in April, after the White House unveiled its shock-and-awe tariff proposals. Investors ditched bonds at the fastest pace in decades, concerned about the impact of those tariffs on the U.S. debt and the economy. Since then, tariff deadlines have shifted frequently. More: The bond market sell-off is more worrisome than the one in stocks. Here's what to know. But investors haven't yet reacted forcefully enough to the notion that Trump will be able to fire, or bully Powell out of a job. That's in part because of a widespread belief that the president will eventually cave, said Blitz, referencing the so-called "TACO" — Trump Always Chickens Out — trade. The acronym describes the president's pattern of announcing hefty new tariffs, causing economic shock, panic and stock declines – only to reverse course later with pauses or reductions that create a market rebound. 'The market has this idea that he's going to bully and bully and bully, but he'll never actually do it,' Blitz said. 'But I think this is where the danger lies, which is that Trump pushes to the outer reaches of the universe. People expect the fabric of the universe to snap and push him back to the middle, right? But they don't really understand that he is intent on ripping the fabric of the universe. He keeps pushing and pushing and pushing, softening the opposition every time he does it, and then he will break through.' This article originally appeared on USA TODAY: Trump amps up pressure on Fed Chair Powell, and investors react Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
03-07-2025
- Business
- Yahoo
US stocks back at records as oil prices rally
Major US stock indices closed at fresh records Wednesday following a US-Vietnam trade deal, while oil prices jumped after Iran suspended cooperation with the UN nuclear watchdog. Both the S&P 500 and Nasdaq finished at records for the third time in four days after Trump reached an accord with Vietnam. "Little by little, we are coming to agreements," said Sam Stovall of CFRA Research. This "should be regarded as positive." The Vietnam announcement bolsters hopes about additional US trade accords and helped offset a report that showed private-sector US employers shed 33,000 jobs in June. The strong performance in US stocks also came in spite of a rise in US Treasury yields that suggests unease in the bond market as Congress weighs Trump's massive tax and spending package that has been projected to swell US debt. Optimism over the bill's extension of deep tax cuts has been offset by concerns it will add around $3 trillion to the US national debt. "It's driven a wedge between stocks and bonds," said Jack Ablin of Cresset Capital Management. "Equity markets are applauding the tax cuts... bond markets are concerned about the long-term effects." In Europe, London's FTSE 100 ended the day down 0.1 percent and the pound lost around one percent against the dollar on speculation over the future of British finance minister Rachel Reeves. Reeves appeared visibly upset in parliament a day after Prime Minister Keir Starmer's Labour government U-turned over key welfare reforms, wiping out a multibillion-pound boost to public finances and triggering speculation that she could lose her job. "The prospect of political turmoil is causing bond yields to rise. The market is pricing in the possibility of a replacement chancellor with a more left-leaning agenda, which is spooking the bond market and waking up the bond vigilantes from their slumber," said Kathleen Brooks, research director at XTB. Brooks added that axing Reeves would be "a strange choice" from a market perspective. Oil prices jumped about three percent as analysts cited a revived chance of fighting between Iran and Israel. On June 25, a day after a ceasefire took hold between the two countries, Iranian lawmakers voted overwhelmingly to suspend cooperation with the Vienna-based IAEA. State media confirmed on Wednesday the legislation had now taken effect. Washington, which has been pressing Tehran to resume the negotiations that were interrupted by Israel's military action on June 13, said the Iranian decision was "unacceptable." "We'll use the word unacceptable, that Iran chose to suspend cooperation with the IAEA at a time when it has a window of opportunity to reverse course and choose a path of peace and prosperity," State Department spokeswoman Tammy Bruce said. - Key figures at around 2040 GMT - New York - Dow: FLAT at 44,484.42 (close) New York - S&P 500: UP 0.5 percent at 6,227.42 (close) New York - Nasdaq: UP 0.9 percent at 20,393.13 (close) London - FTSE 100: DOWN 0.1 percent at 8,774.69 (close) Paris - CAC 40: UP 1.0 percent at 7,738.42 (close) Frankfurt - DAX: UP 0.5 percent at 23,790.11 (close) Tokyo - Nikkei 225: DOWN 0.6 percent at 39,762.48 (close) Hong Kong - Hang Seng Index: UP 0.6 percent at 24,221.41 (close) Shanghai - Composite: DOWN 0.1 percent at 3,454.79 (close) Euro/dollar: DOWN at $1.1801 from $1.1806 on Tuesday Pound/dollar: DOWN at $1.3634 from $1.3746 Dollar/yen: UP at 143.65 yen from 143.42 yen Euro/pound: UP at 86.52 pence from 85.88 pence Brent North Sea Crude: UP 3.0 percent at $69.11 per barrel West Texas Intermediate: UP 3.1 percent at $67.45 per barrel burs-jmb/acb
Yahoo
27-06-2025
- Business
- Yahoo
Analysis-Market bets on a more dovish Fed as Trump eyes Powell's replacement
By Saqib Iqbal Ahmed NEW YORK (Reuters) -The gulf between where the Federal Reserve projects interest rates will be by the end of 2026 and the more aggressive cutting financial markets expect by then is partly due to the expectation that U.S. central bank chief Jerome Powell will be replaced by somebody more dovish next year, investors said. They, however, cautioned against assuming that a change of guard at the Fed would necessarily deliver as much policy easing as markets and U.S. President Donald Trump expect. In new economic projections released last week, Fed policymakers penciled in three quarter-percentage-point cuts by December 2026. That's two cuts short of the roughly 125 basis points of easing that fed funds futures suggest. The fed funds rate is what banks charge each other for overnight lending, and serves as the Fed's main policy lever. It has stood in the 4.25%-4.50% range since the last easing in December. Two of the projected quarter-percentage-point cuts were for 2025, with one more next year. While the difference stems from several factors, including expectations for how Trump's tariffs will affect the economy and inflation, hopes for a more accommodative Fed chief are part of the mix, investors said. "Powell's term is up in May, and he could be replaced by someone super friendly to the administration," Jack Ablin, chief investment officer of Cresset Capital in Chicago. "I think this is probably a bigger factor than a lot of investors believe," Ablin said. Trump has not decided on a replacement for Powell and a decision isn't imminent, a person familiar with the White House's deliberations said on Thursday. Chicago Fed President Austan Goolsbee told CNBC any move to name a "shadow" chair would be ineffective. On Monday, traders in futures tracking the Secured Overnight Financing Rate (SOFR), another key overnight rate, pushed the implied yield of futures contracts maturing in December 2026 65 basis points (bps) below those expiring in December 2025, the most negative that spread has ever been. This development shows that a deeper economic slowdown than expected is also being priced in. Powell told Congress this week that higher tariffs could boost inflation this summer, and that the U.S. central bank isn't rushing to cut rates. Trump, who has repeatedly called for rate cuts, said on Tuesday that U.S. rates should be lowered by at least two to three percentage points. On Wednesday, he called Powell "terrible" in his latest attack on the central bank chief and said he has three or four people in mind as contenders for the top Fed job. "The administration is now laying the groundwork – including with the 'One, Big, Beautiful Bill' – to turbocharge economic, job, and investment growth, and it's high time for monetary policy to complement this agenda and support America's economic resurgence," White House spokesperson Kush Desai said. Trump has toyed with the idea of selecting and announcing Powell's replacement by September or October, the Wall Street Journal reported on Wednesday, citing people familiar with the matter. Such a move would mean Powell would have a "shadow" for possibly the last six meetings of his tenure. A battered dollar took another beating on Thursday as investors fretted over fresh signs of an erosion in U.S. central bank independence. Still, such a move would back the market's more dovish view on future rate cuts. "It's a reasonable thesis that Trump will put up a person that will be more amenable to lower rates," said Mark Malek, chief investment officer of Siebert Financial. FED INDEPENDENCE According to online prediction market Polymarket, the top candidates to replace Powell are Fed Governor Christopher Waller, former Fed Governor Kevin Warsh, White House economic adviser Kevin Hassett, Treasury Secretary Scott Bessent and Judy Shelton, a former Trump pick for the Fed's Board of Governors whose nomination was withdrawn during the Biden administration. Another prediction site, Kalshi, lists Waller as having the best chance to be nominated, closely followed by Warsh. Waller recently said he felt the inflation risk from tariffs was small and that the Fed should cut rates as soon as its next meeting in July. Meanwhile, Warsh suggested last month a possible pathway to lower policy rates and criticized the Fed's conduct of monetary policy. Still, investors warned that the head of the Fed is only one of 12 voting members at the central bank's monetary policy meetings. Part of the role is to build consensus with a large group of policymakers, making excessive reliance on that person's ability to deliver lower rates risky. "Obviously the chair has a very big influence on what the committee does, but the chair is not the committee," Siebert Financial's Malek said. "The chair will always try to seek a consensus," he said. Nor is it a given that the next Fed chief would risk the central bank's independence. "The most important part about the Fed is its neutrality," said Jay Woods, chief global strategist at Freedom Capital Markets. "For the next Fed chair to get appointed, yes, you want to appease the president to get that nomination. But you still have to get everyone in that room to be behind a common narrative," Woods said. A rate-cutting trajectory not backed by data would hurt the next Fed chief's image, analysts said. "Whoever is appointed may have a cloud cast over his or her term that President Trump is pulling the strings," said Brian Jacobsen, chief economist at Annex Wealth Management. "I'm not too worried that we're going back to a period where the chair is in the pocket of the president, like under (President Richard) Nixon." Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Zawya
27-06-2025
- Business
- Zawya
Market bets on a more dovish Fed as Trump eyes Powell's replacement
NEW YORK - The gulf between where the Federal Reserve projects interest rates will be by the end of 2026 and the more aggressive cutting financial markets expect by then is partly due to the expectation that U.S. central bank chief Jerome Powell will be replaced by somebody more dovish next year, investors said. They, however, cautioned against assuming that a change of guard at the Fed would necessarily deliver as much policy easing as markets and U.S. President Donald Trump expect. In new economic projections released last week, Fed policymakers penciled in three quarter-percentage-point cuts by December 2026. That's two cuts short of the roughly 125 basis points of easing that fed funds futures suggest. The fed funds rate is what banks charge each other for overnight lending, and serves as the Fed's main policy lever. It has stood in the 4.25%-4.50% range since the last easing in December. Two of the projected quarter-percentage-point cuts were for 2025, with one more next year. While the difference stems from several factors, including expectations for how Trump's tariffs will affect the economy and inflation, hopes for a more accommodative Fed chief are part of the mix, investors said. "Powell's term is up in May, and he could be replaced by someone super friendly to the administration," Jack Ablin, chief investment officer of Cresset Capital in Chicago. "I think this is probably a bigger factor than a lot of investors believe," Ablin said. Trump has not decided on a replacement for Powell and a decision isn't imminent, a person familiar with the White House's deliberations said on Thursday. Chicago Fed President Austan Goolsbee told CNBC any move to name a "shadow" chair would be ineffective. On Monday, traders in futures tracking the Secured Overnight Financing Rate (SOFR), another key overnight rate, pushed the implied yield of futures contracts maturing in December 2026 65 basis points (bps) below those expiring in December 2025, the most negative that spread has ever been. This development shows that a deeper economic slowdown than expected is also being priced in. Powell told Congress this week that higher tariffs could boost inflation this summer, and that the U.S. central bank isn't rushing to cut rates. Trump, who has repeatedly called for rate cuts, said on Tuesday that U.S. rates should be lowered by at least two to three percentage points. On Wednesday, he called Powell "terrible" in his latest attack on the central bank chief and said he has three or four people in mind as contenders for the top Fed job. "The administration is now laying the groundwork – including with the 'One, Big, Beautiful Bill' – to turbocharge economic, job, and investment growth, and it's high time for monetary policy to complement this agenda and support America's economic resurgence," White House spokesperson Kush Desai said. Trump has toyed with the idea of selecting and announcing Powell's replacement by September or October, the Wall Street Journal reported on Wednesday, citing people familiar with the matter. Such a move would mean Powell would have a "shadow" for possibly the last six meetings of his tenure. A battered dollar took another beating on Thursday as investors fretted over fresh signs of an erosion in U.S. central bank independence. Still, such a move would back the market's more dovish view on future rate cuts. "It's a reasonable thesis that Trump will put up a person that will be more amenable to lower rates," said Mark Malek, chief investment officer of Siebert Financial. FED INDEPENDENCE According to online prediction market Polymarket, the top candidates to replace Powell are Fed Governor Christopher Waller, former Fed Governor Kevin Warsh, White House economic adviser Kevin Hassett, Treasury Secretary Scott Bessent and Judy Shelton, a former Trump pick for the Fed's Board of Governors whose nomination was withdrawn during the Biden administration. Another prediction site, Kalshi, lists Waller as having the best chance to be nominated, closely followed by Warsh. Waller recently said he felt the inflation risk from tariffs was small and that the Fed should cut rates as soon as its next meeting in July. Meanwhile, Warsh suggested last month a possible pathway to lower policy rates and criticized the Fed's conduct of monetary policy. Still, investors warned that the head of the Fed is only one of 12 voting members at the central bank's monetary policy meetings. Part of the role is to build consensus with a large group of policymakers, making excessive reliance on that person's ability to deliver lower rates risky. "Obviously the chair has a very big influence on what the committee does, but the chair is not the committee," Siebert Financial's Malek said. "The chair will always try to seek a consensus," he said. Nor is it a given that the next Fed chief would risk the central bank's independence. "The most important part about the Fed is its neutrality," said Jay Woods, chief global strategist at Freedom Capital Markets. "For the next Fed chair to get appointed, yes, you want to appease the president to get that nomination. But you still have to get everyone in that room to be behind a common narrative," Woods said. A rate-cutting trajectory not backed by data would hurt the next Fed chief's image, analysts said. "Whoever is appointed may have a cloud cast over his or her term that President Trump is pulling the strings," said Brian Jacobsen, chief economist at Annex Wealth Management. "I'm not too worried that we're going back to a period where the chair is in the pocket of the president, like under (President Richard) Nixon."
