Global investors were unsettled by U.S. President Donald Trump’s announcement to fire Federal Reserve Governor Lisa Cook, intensifying concerns about the politicization of the Fed and its independence. Although markets reacted mildly, with slight shifts in Treasury yields and stock futures, analysts worry this move undermines trust in U.S. institutions and signals Trump’s intent to install loyalists to influence monetary policy. The timing, just before a key Fed meeting, added to investor unease amid ongoing debates about potential rate cuts and inflation risks.
Trump’s actions have already eroded confidence in U.S. sovereign debt and the dollar’s status as the world’s preferred currency, contributing to significant foreign capital outflows from U.S. markets. Despite record-high U.S. stocks, they have underperformed other global markets fueled by technology and AI growth. The dollar has weakened by 9% this year, and foreign central banks have reduced their Treasury holdings. Market sentiment now hinges on Trump’s future rhetoric and moves regarding the Fed, which will influence expectations for interest rate cuts and the performance of U.S. assets.
