The article discusses the market's negative response to President Trump's threats towards Federal Reserve Chairman Jay Powell. The author argues that Trump is unlikely to dismiss Powell due to the potential political and economic consequences.
Dismissing Powell would likely cause significant market shocks, potentially leading to a recession. This could negatively impact Trump's legislative agenda and his party's chances in upcoming elections. The author weighs the low benefits of removing Powell against the high risks. Even lowering interest rates, a potential action by a new Fed chair, could backfire depending on the economic situation.
The article presents differing opinions from several investment professionals. Some believe the probability of Powell's dismissal is very low, citing potential capital flight from the US. Others assign a 50/50 chance, suggesting Trump could benefit regardless of the outcome. A third expert estimates a higher probability, highlighting the potential damage to the US's economic stability.
The author believes the probability of Powell's dismissal is low (around 10%), emphasizing the potential damage to the US's political and economic landscape. While acknowledging varying viewpoints, the author maintains that the potential risks outweigh the rewards for Trump in removing Powell. Despite this, they acknowledge significant harm has already been done, and significant investor uncertainty remains.