[Text/Observer Network Wang Yi] As US President Trump once again exerted pressure on Federal Reserve Chairman Powell, demanding that he cut interest rates, US stocks plummeted on the 21st, US Treasury bonds were sold off, the dollar continued to fall, and uncertainty in the US economy intensified.

Analysts said that Trump's recent comments about Powell "further exacerbated market concerns over the independence of the Federal Reserve," and the uncertainty of US policies caused the dollar and US Treasury bonds to "behave more like risk assets."

On April 21 local time, the three major stock indexes of New York opened lower, with the Dow Jones Industrial Average falling by 0.78%, the NASDAQ Composite Index falling by 1.74%, and the S&P 500 index falling by 1%.

Subsequently, Trump posted a message criticizing "Mr. Too Late" Powell on his self-created social media platform, Truth Social, calling for rate cuts. Trump stated that inflation in the United States was almost zero, but Powell always cut rates too late, which could lead to an economic slowdown.

After Trump made these remarks, selling pressure intensified. By the close of trading that day, the Dow Jones Industrial Average fell 2.48% from the previous trading day, the NASDAQ Composite Index fell 2.55%, and the S&P 500 index fell 2.36%. Among them, all eleven sectors of the S&P 500 index fell, with the technology, energy, and discretionary consumer sectors being hit the hardest.

After Trump criticized Powell, the S&P 500 index fell. The New York Times chart

John Mowrey, chief investment officer at NFJ Investment Group, told The New York Times that the market is still preparing for the uncertainty brought by Trump's chaotic tariff policies, but his attacks on Powell have exacerbated this uncertainty, causing great unease in the market.

This is not the first time Trump has criticized Powell since returning to the White House. One day after Powell warned that tariffs could bring a "challenging situation" to inflation and the labor market, Trump told reporters on the 17th, "If I want him (Powell) to leave, he will leave quickly—believe me."

The next Federal Open Market Committee meeting is scheduled for May. After three rate cuts in 2024, the Fed has kept interest rates unchanged so far this year due to rising inflation risks. However, Trump's "watchful waiting" stance has angered him, as he claims Powell is "playing politics" and hesitates to cut rates. On the 17th, The Wall Street Journal reported that Trump is considering discussing the possibility of dismissing Powell prematurely.

The New York Times analysis pointed out that investors usually prefer low interest rates because they make it easier for companies to borrow and expand their businesses. However, the market has fallen instead after Trump's calls for rate cuts, indicating that investors believe the threat to the Fed's independence outweighs any benefits from the cuts.

The report noted that the independence of the Fed is considered crucial in global financial markets, and threats to this independence have made investors worry about the stability of assets denominated in dollars.

In recent weeks, US Treasury prices have plummeted, and they came under further pressure on the 21st. Due to investors selling bonds, the yield on the 10-year US Treasury note surged above 4.4%, with prices falling.

On the 21st, the US dollar continued to fall against nearly all major currencies, dropping about 1% against the euro to its lowest level in more than three years. The US dollar also fell against the Japanese yen to its lowest level since September last year.

"The idea that Powell may soon step down could cause real panic in the market; he is a rational voice and a well-known figure," Steven Grey, chief investment officer at Grey Value Management, told the Financial Times. The selling of dollar assets on the 21st reflected general concern about the increasingly turbulent policies in the US. "Trump is unreliable and cannot be trusted. Many foreigners infer from his two presidential elections that the US itself can no longer be trusted or relied upon as it did decades ago."

Yujiro Goto, a foreign exchange strategist at Nomura Securities, said that simultaneous bond selling and currency depreciation rarely occur in major reserve currency markets like the US. He attributed the appreciation of the yen (and depreciation of the dollar) to concerns about US "stagflation" and "growing distrust in the credibility of US assets."

In a report on the 20th, China International Capital Corporation Limited pointed out that the uncertainty of US policies has caused the dollar and US Treasury bonds to "behave more like risk assets," and Trump's recent comments about Powell "further exacerbated market concerns over the independence of the Federal Reserve."

Michael Feroli, chief US economist at JPMorgan Chase, stated in the report that "any weakening of the Fed's independence would add upside risks to inflation prospects, which are already under upward pressure from tariffs and slightly higher inflation expectations."

Since Trump announced tariffs on virtually all US trade partners on April 2nd, the S&P 500 index has fallen by about 9%, down approximately 16% from its February high, and multiple rounds of selling have pushed the index close to bear market territory.

Investors and analysts said that any attempt to dismiss Powell or exert pressure on the Fed's monetary policy could lead to further turbulence in US markets. Chris Larkin, director of trading and investment management at Morgan Stanley's E*Trade, said that "Washington news" remains the main catalyst for the market, and market volatility may continue until there is clarity on US trade policy.

This article is an exclusive contribution from the Observer Network and cannot be reprinted without permission.

Source: https://www.toutiao.com/article/7495955650602664483/

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