Markets Slammed as Trump Targets Fed Chair Powell, Raising Fears Over Central Bank Independence
The prospect of President Donald Trump firing Federal Reserve Chair Jerome Powell has sent shockwaves through financial markets, triggering a rare and dramatic selloff across U.S. assets. One strategist called it potentially “the most dramatic rush to the exit from U.S. assets that it is possible to imagine.”
On Monday, investors were rattled after Trump renewed his attacks on Powell, raising concerns about the Federal Reserve’s independence. The Dow Jones Industrial Average fell 2.48%, the S&P 500 dropped 2.36%, and the Nasdaq slid 2.55%. Meanwhile, the yield on the 30-year Treasury bond surged to nearly 4.91%, a three-month high, signaling a sharp drop in bond prices. The U.S. dollar also sank, with the ICE U.S. Dollar Index falling 1% to a three-year low.
The rare combination of falling equities, a weaker dollar, and selling in long-dated Treasurys paints a stark picture of investor anxiety following the long Easter weekend.
Michael Brown, a senior research strategist at Pepperstone, warned that firing Powell would ignite chaos across global markets. “Lower, much lower, equities; Treasuries sold across the board; and, the dollar falling off a cliff,” he wrote. “The longstanding independence of the Fed is key to global trust in the U.S. financial system. Undermining it could destroy the dollar’s reserve currency status and the safe-haven role of Treasurys — potentially forever.”
Credibility Already in Question
Even if the courts block any attempt to remove Powell, some believe the damage to U.S. credibility may already be done. Will Compernolle, a strategist at FHN Financial, said the mere threat to the Fed’s independence is enough to spook foreign investors. “If it gets to the courts, you’ve probably already lost credibility in the eyes of the markets,” he noted.
Trump’s latest attack came last Thursday when he posted on Truth Social that Powell’s firing “cannot come fast enough!” He also told reporters, “If I want him out, he’ll be out of there real fast, believe me.”
The president’s remarks came just one day after Powell warned that new tariffs could fuel inflation while the labor market shows signs of softening — a tricky situation for monetary policy.
According to the Wall Street Journal, Trump has privately discussed replacing Powell with former Fed Governor Kevin Warsh. However, experts say firing a Fed chair isn’t easy. Under the amended Federal Reserve Act, the president can only remove a governor “for cause,” and Powell’s term doesn’t end until May 2026.
Markets Brace for Uncertainty
Michael Reynolds, vice president of investment strategy at Glenmede, said markets are watching closely, though his firm isn’t assuming Powell will be ousted. “We don’t even know if the president has the authority to do that,” he said. “But investors are increasingly pricing in risks to the Fed’s independence.”
Reynolds said they’re not ringing alarm bells yet, but “the margin of concern is growing.”
On Friday, while markets were closed for the Good Friday holiday, White House economic adviser Kevin Hassett confirmed the administration was still reviewing the possibility of firing Powell. Then, on Monday, Trump took another swipe, calling Powell “Mr. Too Late” and warning of an economic slowdown unless rates are cut immediately.
Analysts at Evercore ISI said Monday’s market reaction underscores how harmful any real move against Powell would be. “The risk to Fed independence is negative for all major U.S. asset classes,” they wrote. If Trump follows through, the fallout could shift the market narrative from recession to full-blown stagflation.
“Investors are already demanding a higher premium to hold U.S. assets,” they noted, as flows move toward foreign markets and safe-haven assets like gold, which rose 1.26% Monday.
