Regarding pressuring the Federal Reserve, Nixon is Trump's "model"
The current market is focused on the conflict between Trump and Federal Reserve Chairman Powell, with Trump calling for interest rate cuts. Bank of America’s Hartnett pointed out that this is similar to the situation in 1971 when Nixon pressured the Federal Reserve. At that time, Nixon announced a new economic policy, leading to economic fluctuations. Although the market initially reacted negatively, the S&P 500 index rose by 11% a year later. If Powell is replaced, a similar scenario may unfold
One of the hottest topics in the current market is the conflict between Trump and Powell, as well as Trump's daily insistence on the Federal Reserve Chairman lowering interest rates.
Bank of America’s Hartnett believes that all of this is reminiscent of what happened in the early 1970s.
1971 was the infamous "White House = Federal Reserve interest rate cut" incident. At that time, Nixon announced his "New Economic Policy" (the end of the Bretton Woods system, wage and price freezes, and a 10% import tariff) on August 15, with an unemployment rate as high as 6% and the Consumer Price Index (CPI) reaching 4%. Adding fuel to the fire, then-Federal Reserve Chairman Arthur Burns cut the federal funds rate by 225 basis points from August to December, triggering a cycle of economic booms and busts...
Although the market initially "sold off" (the dollar fell by 5%, the S&P 500 index dropped by 9%, and U.S. Treasury yields fell by 70 basis points), a year later in 1972, the S&P 500 index rose by 11%, while the dollar further depreciated by 8% on the eve of Nixon's re-election in November 1972. If Powell is ousted, a similar situation is expected to unfold.
