Market Mayhem: Trump's Attack on Powell Sends Stocks and Dollar Tumbling

US stocks and the dollar faced a severe downturn as President Donald Trump ramped up his public critiques of Federal Reserve Chair Jerome Powell. Characterizing Powell as “a major loser,” Trump urged the Fed to implement pre-emptive interest rate cuts to bolster the economy, accusing Powell of being excessively slow in responding to economic changes. In a candid social media post, Trump warned of a potential economic slowdown unless the Fed acted immediately.

This latest clash emerges against a backdrop of stock market volatility, largely triggered by Trump’s tariff plans that have raised anxieties about a looming economic recession. On Monday, the S&P 500 index slid approximately 2.4%, marking a staggering 12% drop year-to-date, while the Dow Jones Industrial Average and Nasdaq suffered similar fates with declines of 2.4% and over 2.5%, respectively.

As the market turmoil unfolded, Asian stock markets exhibited subdued trading with Japan’s Nikkei 225 and Australia’s ASX 200 both finishing lower, contrasting with Hong Kong’s modest gains. European markets were similarly impacted, with the UK’s FTSE 100, Germany’s DAX, and France’s CAC all dipping in early trading.

The US dollar, typically viewed as a safe investment in times of crisis, has not evaded the recent upheaval. The dollar index experienced a decline to its lowest level since 2022 on Monday. Additionally, interest rates on US government bonds surged as investors sought higher returns for these traditionally stable assets.

In an apparent flight to safety amid rising uncertainty, the price of gold soared to a new peak of $3,500 per ounce, reinforcing its status as a preferred ”safe haven” for investors.

Trump’s contentious relationship with Powell dates back to his first presidential term, during which he even considered firing him. A recent wave of criticism coincided with Powell’s admonitions that Trump’s import taxes could exacerbate price inflations and slow economic growth. This animosity reached a boiling point last week when Trump publicly called for Powell’s termination, stating that it “cannot come fast enough.” Such a dismissal would be fraught with legal complications given the Federal Reserve’s historical independence from political pressures.

The timing of Trump’s latest remarks aligns with critical international economic meetings in Washington led by the International Monetary Fund (IMF) and World Bank. Economists note that the increasing political pressure on the Fed could threaten financial stability and low inflation, reversing decades of established independence. Projections of a significant economic downturn raise concerns not only for the US but also for global markets, adding to the anxiety surrounding the ongoing market downturn.