Minuk's Musings and A Soap Opera

Let’s talk about the drama this week — and no, not the NHL playoff drama (GO LEAFS GO!).

 

This past week, markets have been watching a soap opera called “Can Trump Fire Jerome Powell Before Powell’s Term Ends in 2026?”

 

Washington Post

 

Who is Jerome Powell you may ask?

He is the Chair of the Federal Reserve (Fed) which is responsible for setting interest rate policy in the US (amongst other things).

 

Importantly, the Fed is supposed to operate independently, free from political influence, so they can manage inflation and employment without being pressured by short-term political goals … like making a President look good. When Central Banks like the Fed lose independence, it often isn’t pretty. Just look at Turkey’s currency meltdown after political meddling in interest rate policy.

 

 

In episode 1 of this Trump/Powell soap opera, Trump mused publicly if he should fire Powell because rate cuts haven’t arrived fast enough for his liking. Stock markets didn’t like this uncertainty and stocks were down - again.

 

In episode 2 of this week, in classic style, Trump backtracked and said he “never intended” to do it. The markets let out a resounding “ whew!” and sent the S&P500 higher by 1.5% for three days in a row, historically a very bullish signal for future returns.

 

 

Will we see an episode 3 next week?

 

Bottom line:

Markets again this past week continued to move up and down on a mix of fundamentals and guesswork on what Trump will say next. Tweets, tariffs, and rate cut tea leaves are all somewhere in this mix.

 

Go vote and as always, let me know if you’d like to talk through anything.

 

Have a nice weekend.

 

Rich

Investment Advisor