Trump's actions trigger another catastrophic downturn in the stock market

Trump's actions trigger another catastrophic downturn in the stock market

Stock Markets Dive Amid Trump-Powell Tensions

The U.S. stock markets took a nosedive on Monday, following yet another attack by President Donald Trump on Federal Reserve Chairman Jerome Powell. Trump once more called for lower interest rates, branding Powell as a "latebloomer" and a "major lose" on Monday. However, Powell isn't keen on cutting rates due to inflation risks, despite Trump's tariff wars.

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Economists forewarn that the trade conflict could result in sluggish economic growth or even a recession in the States. While reduced interest rates could speed up inflation, Trump insists that there is almost no inflation at present. Experts fear that companies could transfer higher costs from Trump's tariffs to customers, triggering an inflation spike. Trump's "latebloomer" jibe was a barb aimed at Powell's tardiness in raising interest rates during the COVID-19 pandemic inflation surge.

Trump's pressure on Powell irks investors

Investors grew uneasy over the prospect of Trump seeking to oust Powell from office, triggering a sell-off in the U.S. stock market on Monday. The Dow Jones Industrial closed 2.48% lower at 38,170.41 points. The tech-heavy Nasdaq 100 fell 2.46% to 17,808.30 points. The S&P 500 plummeted 2.4%.

Trump's economic advisor, Kevin Hassett, revealed on Friday that the president might consider firing Powell. Powell's term at the helm of the Federal Reserve runs until May 2026, and he has made it clear that he intends to serve his full term. As per a 1930s Supreme Court ruling, a U.S. president cannot remove a central bank chairman without a valid reason.

Is Tesla under a red alert?

TESLA shares tumbled 5.8%. The electric vehicle powerhouse is scheduled to release its first-quarter earnings on Tuesday, during which deliveries dropped by 13%. Analyst Dan Ives from Wedbush Securities, who was previously bullish on Tesla's prospects, sounded the alarm over the weekend. Ives claims Tesla is currently in a "red alert" phase, and CEO Elon Musk ought to focus exclusively on Tesla instead of his role in the Trump administration.

NVIDIA shares dropped another 4.5%. The semiconductor giant's stock had already been adversely affected on Thursday after the U.S. government halted NVIDIA's sales of even basic chips with the H20 designation to China. NVIDIA's AI chips are indispensable in training and operating software with AI capabilities.

Netflix shares, however, surged 1.5%. The streaming giant surprised investors with its quarterly results and expectations for the current quarter after the market closed on Thursday.

Background:

The likelihood of President Trump trying to discharge Jerome Powell as Federal Reserve Chairman is debatable for several reasons:

1. Legal Immunity: The Supreme Court has indicated that the Federal Reserve is a "uniquely structured, quasi-private entity" following the historical tradition of the First and Second Banks of the United States, which suggests that its members are not removable by presidential decree apart from specified causes[1][2]. This hints that Trump may not have the authority to dismiss Powell.
2. Public Statements: Despite Trump's previous hostility towards and condemnation of Powell, he has publicly declared his lack of intention to remove Powell before his term ends in May 2026[1][3]. Trump has instead concentrated on exhorting the Fed to cut interest rates, which conforms with his economic policy agenda.
3. Market Instability: Removing Powell could lead to significant market instability, as observed in past occurrences when Trump's actions have affected financial markets. This potential turbulence may deter Trump from even considering such a move[2][3].

Overall, while Trump aspires to sway the Fed's monetary policy, the combination of legal protections and potential market repercussions makes it uncertain that he will attempt to remove Powell.

• Amidst the ongoing tension between President Trump and Federal Reserve Chairman Jerome Powell, investors are growing increasingly anxious about the future of monetary policy.
• The potential removal of Jerome Powell by President Trump could lead to significant market instability, according to financial experts.
• Trump's public call for the Federal Reserve to lower interest rates has raised concerns about the impact on inflation and general economic growth.
• The U.S. President's pressure on Jerome Powell to lower interest rates is also being closely watched by businesses and investors in the stock market.

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