Markets are firmly opposed to Donald Trump’s ongoing threats to remove Federal Reserve Chair Jerome Powell.
Stocks wobbled again this week following fresh reports that Trump was actively considering firing Powell—a move that investors and financial leaders alike warn could inject serious volatility into markets and damage the Fed’s credibility.
The backlash isn’t just about one man’s job. It’s about the independence of the Federal Reserve—a cornerstone of investor confidence and monetary stability. Any attempt by a sitting president to interfere with or preempt the Fed’s decisions on interest rates would raise red flags for financial advisors, asset managers, and institutional investors alike.
When Trump first floated the idea of ousting Powell back in April, equity markets responded with unease. This week’s rumors triggered a similar reaction before a partial rebound when Trump clarified that he wasn’t planning to fire Powell—at least not yet.
While there’s still uncertainty about whether Trump could or would actually remove Powell before the end of his term, Wall Street is overwhelmingly aligned on one point: Politicizing the Fed would be a serious misstep. Here’s how several key financial leaders are framing the risk:
Brian Moynihan, CEO, Bank of America
Moynihan stressed the essential role of Fed independence in supporting stable economic policy. In an interview with Bloomberg, he noted that monetary policy must remain insulated from short-term political pressures, especially in an environment where inflation risks remain elevated.
“The Fed is an independent agency and they're meant to be outside the purview of the executive and Congress,” Moynihan said. “If we drop rates too far, inflation may kick up, and then you have to raise them back quickly. That creates uncertainty and disrupts planning for businesses and households.”
His comments echo a broader concern among bank executives that undermining the Fed would weaken investor trust in the central bank’s long-term decision-making framework—something wealth managers rely on to guide clients through market cycles.
A Potential ‘Shadow Fed Chair’?
Amid the speculation, some Trump advisors have reportedly floated the idea of naming a successor to Powell before the end of his term—essentially a “shadow Fed chair” who would telegraph the administration’s intentions and pressure Powell to align with those goals.
Such a move would be highly unconventional and could destabilize fixed-income markets. It would also call into question the Fed’s dual mandate, leading investors to fear that future rate decisions would serve political objectives rather than data-driven outcomes.
For RIAs and portfolio managers, the implications are significant. Any erosion in central bank credibility could drive Treasury yields higher, steepen the yield curve, and complicate duration strategies. Risk assets, particularly in interest-rate-sensitive sectors like utilities, real estate, and consumer lending, could also face downward pressure.
What Advisors Should Watch
Trump’s criticism of Powell has centered on the belief that the Fed is keeping rates too high and thus slowing the economy. But firing Powell—or simply signaling an intent to do so—could backfire by spooking markets and raising borrowing costs, the exact opposite of what Trump says he wants.
With Fed independence once again in the political crosshairs, wealth advisors should help clients prepare for renewed volatility around policy expectations. That includes scenario planning for sudden shifts in market sentiment, reassessing inflation hedges, and evaluating fixed income exposure across portfolios.
RIAs and family offices may also want to pay close attention to how Powell communicates future decisions. Any indication that his policymaking is being influenced—directly or indirectly—by political pressure could affect market confidence and, by extension, portfolio valuations.
The Bottom Line
While the Fed’s future leadership remains uncertain, one thing is clear: Wall Street wants the central bank to operate without interference. For advisors navigating this environment, staying focused on long-term fundamentals and preparing for short-term policy-driven disruptions will be key.
Whether or not Powell remains in his role through the end of his term, the broader issue is institutional credibility. Wealth managers and RIAs must be ready to help clients filter out the political noise while positioning portfolios for resilience in what could be an increasingly politicized economic landscape.
