Powell’s Battle-Ready Fed Gives the Trump Trade a Stress Test

Published On Dec 20, 2024, 4:32 PM

The Federal Reserve, led by Jerome Powell, has recently adopted a hawkish stance regarding interest rates, which could impact the markets significantly. While previously there was optimism about the economic policies introduced by the incoming President Trump, Powell's shift towards maintaining higher interest rates has unsettled investors. As a result, this has caused volatility across markets, particularly affecting riskier assets and leading to a surge in bond yields. Many investors are recalibrating their strategies, considering Powell's indications that inflation remains a critical concern. The S&P 500 faced its worst performance on a Fed decision day in over two decades, and sectors such as small caps and value stocks have struggled. Overall, there is growing uncertainty about the extent to which new economic policies will foster growth versus the persistent risk of inflation that could undermine market optimism.