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President Trump isn’t shy about letting everyone know he’s thinking about firing Jerome Powell, the head of the Federal Reserve. But a top dog at Evercore ISI, Krishna Guha, is waving a red flag, warning that the stock and bond markets could take a serious nosedive if Trump actually tries to give Powell the boot.

It’s almost as if the market itself is saying, “We’re with Powell.” No sooner had Trump publicly criticized the Fed chair earlier today than the markets started to wobble, then tumble. By 11:30 a.m. Monday, the Dow Jones Industrial Average, which tracks the biggest U.S. companies, was down a hefty 2.4%, the S&P 500 was off by more than 2.5%, and the tech-heavy Nasdaq was feeling the pain, dropping nearly 2.9%.

But if Trump actually did take the drastic step of trying to remove Powell? Hold on tight, because things could get even messier. Krishna Guha said, “If you actually did try to remove the Federal Reserve chairman, I think you would see a severe reaction in markets with yields higher, dollars lower and equities selling off. I can’t believe that that’s what the administration is trying to achieve.”

Krishna Guha’s Plea: Let Powell Finish His Term!

Trump’s been on Powell’s case, urging him to cut interest rates. However, Powell isn’t budging and insists there’s no rush to cut rates. This has clearly frustrated Trump, leading him to want to show Powell the door, though that might be a drawn-out process. Adding fuel to the fire, Kevin Hassett, a White House advisor, has also mentioned that the president’s team is looking into ways to remove Powell from his position.

When Powell himself was asked about the possibility of being fired, he simply stated that he doesn’t believe the president has the official authority to just fire the Fed Chair.

Trump could try a different tactic to pressure Powell without outright firing him: hinting publicly about who he’d pick as the next Fed chair once Powell’s term is up next year. This so-called “shadow Fed Chair” could then signal to the markets that lower interest rates are on the way as soon as Powell is gone. Interestingly, according to Polymarket, 58% already think Powell will be out of the picture by next year.

Krishna Guha’s advice is clear: “It’s strongly in the administration’s interest to take a deep breath and let Fed Chair Powell run things for the remainder of his term. That’s the best shot at keeping inflation expectations well anchored, keeping bond yields well behaved and allowing the Fed to cut without causing real problems in markets.” 

Buckle Up: US Markets Brace for Another Volatile Week

Looks like it’s going to be another bumpy ride for the S&P 500, Nasdaq, and Dow Jones this week – the second in a row! Wall Street is holding its breath, waiting to see if Trump can strike a deal on tariffs.

What kind of deal are we talking about, if anything? Positive news on the trade front? Expect both the NYSE and Nasdaq to jump into buying mode. However, global trade winds are definitely going to be a major factor for the stock market this week.

Plus, earnings reports from some major players are on the horizon this week. Keep an eye on earnings from giants like Tesla and Alphabet (Google’s parent company), two of the “Magnificent Seven” mega-cap stocks that have seen their dominance slip after a couple of years ruling the market.

Investors are hanging on every word of these financial reports, trying to gauge what the tariff situation means for these companies. So far in 2025, all seven of those “Magnificent Seven” stocks are significantly down.

Alphabet’s down around 20%, and Tesla’s taking a bigger hit, down 40%. These earnings reports could be the catalyst for a turnaround, or they could send stocks even lower – we’ll see!

To get a sense of which way the tariff winds are blowing, investors will be closely watching for any hints from President Trump himself. Any positive vibes coming from Trump could trigger some buying action.

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Source: cryptopolitan.com