US markets plunged Monday, with losses exceeding 2% on major indices, after Donald Trump intensified his criticism of Jerome Powell, Chairman of the Federal Reserve (FED). These statements revived fears about the monetary institution’s independence and increased uncertainty about the path of interest rates.
A challenge to the FED’s autonomy
On his Truth Social network, the former president called Powell a “huge loser,” demanding an immediate rate cut to avoid an economic slowdown. His team has also reportedly begun considering a possible dismissal, even though Powell’s term extends through 2026. Such political interference, unprecedented in decades, has shaken investor confidence in the Fed’s ability to fight inflation without external pressure.
Cascading Reactions on the Markets
Stock Indices: The Dow Jones lost nearly 1,000 points (-2.7%), the S&P 500 fell 2.74% (16% off its February peak), while the tech-driven Nasdaq fell more than 3%.
Key Sectors: The “Magnificent Seven” (Alphabet, Amazon, Meta, etc.) all closed in the red, with Tesla posting a 6.8% decline before the release of its quarterly results.
Bond Markets: Long-term bond yields have risen, signaling increased distrust. Short-term rates have fallen, reflecting expectations of monetary easing.
A Poor International Context
US-China trade tensions, coupled with the announcement of delays in Tesla deliveries and speculation about Huawei chips, are exacerbating volatility. The dollar, meanwhile, hit its lowest level in several months against a rising euro and yen.
Perspectives : Towards a Vicious Circle?
Strategists at US Bank and Saxo warn of an exodus of US assets if the Trump administration continues to undermine the Fed’s credibility. A recession scenario, already suggested by several analysts, could materialize if rates remain high despite an economic slowdown.
This session serves as a reminder of the markets’ fragility in the face of political uncertainties, where every presidential statement can now trigger a global shockwave.
