$BTC continues to be the Trum-Fed series for updates.
Stocks and bonds will collapse if and when Trump takes action against Jerome Powell of the Fed.
Trump has made it clear that he is considering firing Jerome Powell. However, one of the vice presidents of Evercore ISI, Krishna Guha, warned that stocks and bonds are likely to plummet if President Trump attempts to fire the Fed Chairman.
It seems that the market is siding with Powell. Immediately after Trump criticized the Fed chairman today, the market dropped sharply. As of 11:30 AM on Monday, the Dow Jones Industrial Average of the largest U.S. stocks fell 2.4%, the S&P 500 dropped more than 2.5%, and the Nasdaq composite declined nearly 2.9%.
Now, if Trump goes further to remove Powell, things could get worse. Krishna Guha stated, "If you really try to remove the Chairman of the Federal Reserve, I think you will see a backlash in the market with higher yields, a falling dollar, and a stock sell-off. I can't believe that's what the administration is trying to achieve."
Krishna Guha urges Trump to allow Fed's Powell to complete his term.
Trump has attacked Powell, demanding that he lower interest rates. However, Powell has refused to act and stated that he is not in a hurry. Trump has expressed his frustration, leading him to want to fire Powell, although it may take time. Kevin Hassett, a White House aide, also mentioned that the president's team is considering the removal of Powell.
When asked about this ability, Powell stated that he does not believe the president has the official authority to dismiss the Chairman.
The president could pressure Powell without firing him by clearly stating to the public who he wants to appoint as Fed Chairman when this position opens next year. This "shadow Fed Chairman" could signal to the market that interest rates will be lowered after Powell leaves. According to Polymarket, 58% believe Powell will leave next year.
Krishna Guha advises that, "The administration should take a deep breath and let Fed Chairman Powell manage things for the remainder of his term. That is the best way to keep inflation expectations anchored, keep bond yields reasonable, and allow the Fed to cut without causing any real issues for the market."
The U.S. market is preparing for a volatile week.
For the second consecutive week, the S&P 500, Nasdaq, and Dow Jones will face very difficult weeks. Wall Street investors are waiting to see if Trump can reach a deal on tariffs.
What would the terms and conditions be if an agreement is reached? If there is news of an agreement, both the NYSE and Nasdaq will switch to buy mode. However, trading worldwide will significantly affect the stock market this week.
During the week, several major companies will report their earnings. Tesla and Alphabet, the parent company of Google, are two of the "Magnificent Seven" large-cap companies whose stocks have dropped after two years of dominating the stock market.
Investors are closely watching their financial results as they try to understand what will happen with the tariffs that are still being negotiated. By 2025, all seven large-cap stocks of the Magnificent Seven have fallen sharply.
Alphabet fell about 20% and Tesla dropped 40%. However, these reports could impact the rise or fall of their stocks.
To get an idea of the possibility of some kind of tariff agreement, investors will also listen to what U.S. President Donald Trump has to say. There may be some buying if there are any favorable comments.