The Dow Jones and S&P 500 traditionally appreciate — literally — when the Federal Reserve cuts interest rates. Indeed, though the Fed operates autonomously, there is often political pressure from presidents hoping for bull markets to advocate for rate cuts.
(NOTE: Rate cuts, while contributing to inflation, can look like a panacea to a 401K holder.)
Donald Trump, for example, insinuated that Fed Chair Jay Powell was playing politics when the Fed’s 50 basis point cut in September helped give wings to the pre-election Biden-Harris stock market.
Now with stocks performing poorly on extreme volatility since President Trump’s new trade war tariffs changed the fundamentals of the global markets, Powell was asked during an appearance at the Economic Club of Chicago about “some people” who believe that the Fed “will intervene if the stock market plummets. Are they correct?”
After some laughter from the crowd, Powell replied: “I’m going to say ‘No’ — with an explanation.”
Rajan: Some people believe the fed will intervene if the stock market plummets. Are they correct?
Mr. Powell: I’m going to say no, with an explanation.. pic.twitter.com/wr6LrvUz0j
— Acyn (@Acyn) April 16, 2025
“Markets are processing what’s going on. It’s really the policies, particularly the trade policy. The question is where’s that going to land? And we don’t know that yet. And until we know that you can’t really make informed assessments that would still be highly uncertain once you know what the policies are… So markets are struggling with a lot of uncertainty and that means volatility,” Powell said.
“But having said that,” Powell said, “markets are functioning. Conditional on being such a challenging situation, markets are doing what they’re supposed to do. They’re orderly and they’re functioning just about as you’d expect them to function.”
Powell: In terms of cutbacks in funding and for science, we do see, particularly in cities with lots of universities and research hospitals, research institutions, we are hearing significant layoffs and significant impacts on employment. I don’t know how much that will total. In… pic.twitter.com/JEt6RXHUxS
— Acyn (@Acyn) April 16, 2025
Below Powell gave more details about the current volatility and the likelihood that it will endure for a significant period of time.
Powell: The level of tariff increases announced so far is significantly larger than anticipated, and the same is likely to be true of the economic effects which will include higher inflation and slower growth. pic.twitter.com/YQErrVQGni
— Acyn (@Acyn) April 16, 2025