Trump’s simmering resentment towards Fed chairman Powell for not bowing to his demands for an immediate interest rate cut was set off again over the weekend by a widely-read pro-Powell opinion article in the Wall Street Journal which described the president’s tariff policy as a “tax” and an “error”.
One analyst described any undermining of the Fed’s sacred independence as a “welcome to the jungle” moment that would accelerate the increasingly popular “Sell America” trade and be extremely damaging to US financial markets. While Wall Street does not currently believe that Trump will ditch Powell (because he legally can’t), the fact it’s even a thing that’s being talked about is now proving very troubling.
The US Dollar’s recent slide steepened, longer term interest rates spiked, gold reached all-time highs and the moment the opening bell rang in New York on Monday, stocks dived sharply lower across the board and then spiraled even further down as Trump, clearly triggered by the WSJ article, escalated his attack on Powell who he called a “major loser”. By the end of a hideous session, all the major stock indexes had diminished by about 2.5% with the pain pretty evenly distributed across all sectors. Long end interest rates zoomed higher.
Tuesday saw a bounce-back in stock prices initially on a sense that Monday’s rout may have been overcooked and about half of the previous day’s damage was undone within minutes of the open. This upward trajectory rapidly accelerated after Treasury Secretary Bessent called the tariff standoff with China “unsustainable” and expected the situation to de-escalate “in the very near future”. Monday’s losses were reversed. Longer term interest rates stabilized.
Markets reacted positively on Wednesday to Trump’s rather absurd claim that it had never even crossed his mind to fire Powell. Slightly more conciliatory tariff language from the White House implied to financial markets that the adults in the room may finally be having a moment. All this pushed stocks further into the green and the indexes ended the session nicely higher.
Thursday saw a third straight up-day for stocks (historically a more uncommon occurrence than you might think and one that can often precede sustainable rallies in equity prices) and interest rates whipsawed dramatically lower after multiple Federal Reserve officials publicly mused about possibly cutting interest rates in the near future (June, maybe?).
After the close, Google parent and major index fund component Alphabet reported sensational Q1 revenues and profit that blew through expectations and was rewarded in the after-market by a tasty jump in the stock price. The word “tariff” appeared nowhere in the report.
Friday rolled around with the indexes feeling a little soft at the open after China laughed off Trump’s evidence-free boast that bilateral trade talks were ongoing as well as the temptation for institutional traders to take profits on the three-day price spike.
This was offset however by Wall Street continuing to be impressed by the mostly favorable Q1 earnings reports so far and specifically cheering Google’s numbers. Stocks finished a touch higher on the day but substantially up for the week, which was something which had looked like a lost cause following Monday’s ugly price action.
There’s been much talk of late about the potential erosion of “American economic exceptionalism”. Here’s what that means in plain English: the US economy is the most resilient and innovative in the world and US financial markets are by far the most liquid, transparent and well-run on earth. It has been that way for decades. At the heart of US exceptionalism is the assumption of an unwavering rule of law and rock-solid structure of the US government and financial markets.
Put plainly, global investors buy US assets and come here to innovate because 1) they know the rules and the court system is well-established and broadly viewed as impartial and 2) these rules don’t change based on the latest election cycle or on who is in control in Washington DC. Even just floating the idea that this environment might possibly be at some kind of risk is remarkably unhelpful to US assets.
So much of the pain experienced in financial markets this year seems self-inflicted and, frankly, so infuriatingly unnecessary. Trump raging at Powell last week like an insecure schoolyard bully is a great example of that. That had no business crashing stock prices. But it did. It shouldn’t have made long term government bonds act like fricking Gamestop. But it did.
Strange times.
If you are not yet a client of Anglia Advisors and would like to explore becoming one, please feel free to reach out to arrange a complimentary no-obligation discovery call with me.
ARTICLE OF THE WEEK ..
“We’ve been looking in the abyss since the run-up to Liberation Day on April 2nd. We’re all tired of it. Trump got tired of it too.”
Things have definitely changed over the last week or two. Great update from Josh Brown on where things stand now ..
.. AND I QUOTE ..
“Time can be a thief, but it can also deliver outcomes you never thought possible through the magic of compounding. Investing works the same way. Compounding can take your portfolio to levels you can’t even fathom—literally, because our brains think linearly, not exponentially.”
Callie Cox, Ritholtz Wealth Management
LAST WEEK BY THE NUMBERS:
Last week’s market color courtesy of finviz.com
Last week’s best performing US sector: Technology (two biggest holdings: Apple, Microsoft) ⬆︎ 8.2% for the week
Last week’s worst performing US sector: Consumer Defensive (two biggest holdings: Costco, Walmart) ⬇︎ 1.0% for the week
SPY, the S&P 500 Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest U.S. companies. Its price rose 4.7% last week, is down 6.0% so far this year and ended the week 10.1% below its all-time record closing high (02/19/2025).
IWM, the Russell 2000 Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest U.S. stocks. Its price rose 4.3% last week, is down 12.1% so far this year and ended the week 19.9% below its all-time record closing high (11/08/2021).
INTEREST RATES:
FED FUNDS * ⬌ 4.33% (unchanged)
PRIME RATE ** ⬌ 7.50% (unchanged)
3 MONTH TREASURY ⬇︎ 4.32% (4.34% a week ago)
2 YEAR TREASURY ⬇︎ 3.74% (3.81% a week ago)
5 YEAR TREASURY ⬇︎ 3.88% (3.95% a week ago)
10 YEAR TREASURY *** ⬇︎ 4.29% (4.34% a week ago)
20 YEAR TREASURY ⬇︎ 4.75% (4.82% a week ago)
30 YEAR TREASURY ⬇︎ 4.74% (4.80% a week ago)
Treasury data courtesy of ustreasuryyieldcurve.com as of the market close on Friday.
* Decided upon by the Federal Reserve. Used as a basis for interbank loans and for determining high yield savings rates.
** Wall Street Journal Prime rate. Used as a basis for determining many consumer loan rates such as credit cards, personal loans, home equity, securities-based lending and auto loans.
*** Used as a basis for determining mortgage rates.
AVERAGE 30-YEAR FIXED MORTGAGE RATE:
⬇︎ 6.81%
One week ago: 6.83%, one month ago: 6.66%, one year ago: 7.17%
Data courtesy of: FRED Economic Data, St. Louis Fed as of last Thursday.
FEDWATCH INTEREST RATE TOOL:
Where will the Fed Funds interest rate be after the next rate-setting meeting on May 7th?
Unchanged from now .. ⬆︎ 91% probability (86% a week ago)
0.25% lower than now .. ⬇︎ 9% probability (14% a week ago)
What is the most commonly-expected number of remaining 0.25% Fed interest rate cuts in 2025?
⬌ 4 (unchanged from a week ago)
All data based on the Fed Funds interest rate (currently 4.33%). Calculated from Federal Funds futures prices as of the market close on Friday. Data courtesy of CME FedWatch Tool.
FEAR & GREED INDEX:
“Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffet.
The Fear & Greed Index from CNN Business can be used as an attempt to gauge whether or not stocks are fairly priced and to determine the mood of the market. It is a compilation of seven of the most important indicators that measure different aspects of stock market behavior. They are: market momentum, stock price strength, stock price breadth, put and call option ratio, junk bond demand, market volatility and safe haven demand.
Extreme Fear readings can lead to potential opportunities as investors may have driven prices “too low” from a possibly excessive risk-off negative sentiment.
Extreme Greed readings can be associated with possibly too-frothy prices and a sense of “FOMO” with investors chasing rallies in an excessively risk-on environment . This overcrowded positioning leaves the market potentially vulnerable to a sharp downward reversal at some point.
A “sweet spot” is considered to be in the lower-to-mid “Greed” zone.
Data courtesy of CNN Business as of Friday’s market close.
WWW.ANGLIAADVISORS.COM | SIMON@ANGLIAADVISORS.COM | CALL OR TEXT: (646) 286 0290 | FOLLOW ANGLIA ADVISORS ON INSTAGRAM
This material represents a highly opinionated assessment of the financial market environment based on assumptions and prevailing information and data at a specific point in time and is always subject to change at any time. Although the content is believed to be correct at the time of publication, no warranty of its accuracy or completeness is given. It is never to be interpreted as an attempt to forecast any future events, nor does it offer any kind of guarantee of any future results, circumstances or outcomes.
The material contained herein is not necessarily complete and is also wholly insufficient to be exclusively relied upon as research or investment advice or as a sole basis for any financial decisions, including investment decisions or making any kind of consumer choices, without further consultation with Anglia Advisors or other qualified Registered Investment Advisor. The user assumes the entire risk of any decisions made or actions taken based in whole or in part on any of the information provided in this or any other Anglia Advisors published content.
Under no circumstances is any of Anglia Advisors’ content ever intended to constitute tax, legal or medical advice and should never be taken as such. Neither the information contained or any opinion expressed herein constitutes a solicitation for the purchase of any security or asset class. No client advice may be rendered by Anglia Advisors unless and until a properly-executed Client Engagement Agreement is in place.
Posts may contain links or references to third party websites or may post data or graphics from them for the convenience and interest of readers. While Anglia Advisors might have reason to believe in the quality of the content provided on these sites, the firm has no control over, and is not in any way responsible for, the accuracy of such content nor for the security or privacy protocols that external sites may or may not employ. By making use of such links, the user assumes, in its entirety, any kind of risk associated with accessing them or making use of any information provided therein.
Those associated with Anglia Advisors, including clients with managed or advised investments, may maintain positions in securities and/or asset classes mentioned in this post.
If you enjoyed this post, why not share it with someone or encourage them to subscribe themselves?
