- Reports revealed that the White House is seeking ways to fire the Fed Chair.
- 68% of the companies that have reported earnings have beaten estimates.
- Market participants are watching the upcoming US PMI data.
Equities collapsed on Monday as more uncertainty rocked investors. Trump’s recent attack on the Federal Reserve has raised concerns about the independence of the institution. Meanwhile, the ongoing trade war with China has increased the likelihood of a rapid economic slowdown in the US. As a result, investors are rushing to safer markets.
On Friday, reports revealed that the White House is seeking ways to fire the Fed Chair. The move comes as Powell maintains his cautious stance on policy. Meanwhile, Trump has been calling for the central bank to continue its easing campaign. The attacks escalated on Monday as Trump demanded that Powell cut interest rates now.
In recent weeks, US markets have experienced turmoil due to Trump’s aggressive tariffs. The US president has imposed and suspended tariffs on almost all its trading partners, creating uncertainty about the US economy. At the same time, he ignited a trade war with China that keeps escalating every week. As a result, the risk of a recession has grown.
Trump has now turned to the Fed because it has become increasingly clear that the economy is in decline. His tariffs have sparked a migration from US assets, which has hurt equities. The S&P 500 index is on the verge of confirming a bear market.
Meanwhile, Powell remains cautious about rate cuts. According to him, the Fed needs more time to assess the impact of tariffs on the economy. Although there may be a slowdown, the Fed Chair is also concerned about a potential spike in inflation. Investors are concerned the Fed will lose its independence, further dimming the outlook for the economy.
US earnings revisions (Source: Citigroup, Bloomberg)
Elsewhere, market participants are watching the first-quarter earnings. So far, 68% of the companies that have reported have beaten estimates. Nevertheless, earnings expectations have dropped since the year began due to economic uncertainty. The next major report will come from Tesla.
Meanwhile, China cautioned countries against working with Trump at the expense of its economy. The move could escalate a global trade war, as some countries withdraw from trade negotiations.
Market participants are also watching the upcoming US PMI data. The report will show the state of business activity in the economy. A downbeat report will worsen economic concerns, further weighing on equities.
