When markets were good, US president Donald Trump was happy to take all the credit. Now, as bearishness intensifies after the worst week for markets in a decade, Trump wants nothing to do with it. And he’s looking for someone to blame.
A convenient scapegoat has emerged in Federal Reserve chairman Jerome Powell, who last week hiked interest rates while also signaling that increases would likely slow in 2019. According to Bloomberg reports, the hike was enough to prompt Trump to investigate whether he could fire Powell.
While markets are still in a better place than when Trump took office—the Dow Jones is up 23% since election day 2016, the S&P 500 18%, and the Nasdaq 25%—2018 was defined by volatility. December has been particularly perilous, with the Dow falling more than 3,300 points since the start of this month. All 30 of its stocks were trading lower this morning (Dec. 24).
This month has also seen the departure of Trump chief of staff John Kelly and defense secretary James Mattis. The US is currently on its third day of a government shutdown. Right now, investors are crying out for stability, which publicly demonizing the central bank is unlikely to foster.
It would be quite difficult for the president to fire the central bank chair, as Trump’s advisors have reportedly told him several times. As of this weekend, incoming chief of staff Mick Mulvaney said Trump now realizes this. The Federal Reserve is intended to be politically independent; even though the president nominated Powell, there’s little precedent for an ouster.
Most important, market volatility has far more to do with unresolved trade tariffs, Brexit, Italian financial turmoil, and other world events than it does just the Fed. Powell may be an easy target, but he’s far from the right one.