Financial markets assess the potential risks of Federal Reserve leadership change because of ongoing tensions between President Trump and Chairman Jerome Powell. Investors remain concerned about the possibility of Powell’s dismissal or resignation despite Trump’s recent statement that Powell would continue his role. The S&P 500 and dollar experienced short-term market declines after previous reports indicated Trump was considering Powell’s dismissal. The removal of Powell from office would create independence concerns at the Federal Reserve which could lead to a 6% decline in the dollar value and create a substantial steepening of the yield curve. The market expects gold prices to rise as a safe-haven asset when leadership uncertainty becomes more pronounced.
