Trump vs. Powell: Déjà vu all over again

Mark Twain once wrote that "History doesn't repeat itself, but it often rhymes."

Well, it turns out Mark was full of it, because President Trump's latest feud with Federal Reserve Chairman Jerome Powell sure feels like history repeating.

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This is an opinion, not financial advice. The views expressed are those of the author, who uses a pseudonym and cannot trade on the platform.

For example, take a look at these excerpts from the New York Times. One is from 2019, and one is from last week. For anyone who just happened to wake up from a five-and-a-half year coma, it probably seems like nothing has changed.

Mr. Trump is facing an economic slowdown in the United States as the effects of his trade war with China and slowing global growth begin to rattle consumer confidence and threaten business investment, particularly in the manufacturing sector.

President Trump on Thursday escalated his long-running attack on the Federal Reserve, by lashing out repeatedly at the head of the nation’s central bank, Jerome H. Powell, for not doing enough to fortify the economy as the effects of tariffs take hold.Back in 2019, Powell refused to lower rates. In hindsight, that was probably for the best, since Covid hit a few months later. Had rates already been at zero or below, the Fed would have been in a very bad spot.

Today, Powell is also refusing to budge, at least so far."For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance," Powell said last week during a speech at the Economic Club of Chicago, citing tariffs as a potential obstacle toward reaching the Fed's 2% inflation target.

"We're never going to be influenced by any political pressure," Powell added.

Kalshi traders don't seem to think Powell is bluffing, and have priced the chances of no rate change at May's FOMC meeting at 83%.

As you might expect, Trump is not reacting well to Powell's comments regarding the Fed's independence.

Kevin Hassett, chair of the White House National Economic Council, recently told reporters that the President and his team are "continuing to study" ways to remove Powell.

And Trump himself is continuing his attacks, including a post on Truth Social earlier today calling Powell, who he originally appointed, a "major loser."

Maybe Main Street isn't phased by the President of the United States calling the Fed chairman a "loser," but Wall Street doesn't seem to like it. As I type this, the Dow is down over 1,000 points.

In all fairness, the drop might not be completely related to Trump's comments about Powell. The market might also be reacting to the fact that the President doesn't seem to know their is a difference between "to" and "too" (...or is it "they're is a difference?").

Either way, while the stock market is panicking, Kalshi traders don't think Powell is in imminent danger of being ousted.

As the chart above demonstrates, odds of Powell leaving or being removed have risen since Trump began his attacks. But traders still think there's a 75% chance that he will ride out the storm.

After all, as Powell himself pointed out, Trump can "study" all he wants, but it would likely take an act of Congress to change the rules that protect Powell from being fired.

That said, there is an upcoming Supreme Court case, Trump vs. Wilcox, that could throw a wrench in the works for Powell and the Fed by overturning current rules that prevent the president from firing members of a commission.

"That's a case people are talking about a lot," Powell said. "I don't think it will apply to the Fed, but I don't know. It's a situation that we're monitoring carefully."

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