Trump criticizes the Federal Reserve again, "stocks, bonds, and currency" face a triple blow, gold and Bitcoin strengthen
Trump has recently criticized Powell multiple times, accusing him of having overly tight policies and threatening to fire him.As Trump continues to attack the Federal Reserve, the market is increasingly worried that he might even disregard verbal condemnation and legal constraints to directly fire Powell. If the Federal Reserve concedes in this power struggle, it will face a crisis of declining dollar credibility and a potential downturn in the U.S. economy. Amid concerns about the shaky foundations of the U.S. economy, a wave of asset sell-offs is unfolding.
"Triple Kill" of Stocks, Bonds, and Currency; Gold and Bitcoin Rise Against the Trend
On Monday, U.S. assets faced a "Black Monday," experiencing a "triple kill" of stocks, bonds, and currency. The three major stock indices all suffered significant losses: the Dow fell 2.48%, the Nasdaq dropped 2.55%, and the S&P 500 declined 2.36%. Tech stocks were hit hard, with Tesla down over 5%, Nvidia down over 4%, and the total market value of the "Big Seven" in U.S. stocks evaporating by $404.6 billion. The yield on 10-year U.S. Treasuries rose by 7 basis points to 4.41%, while the 30-year yield jumped by 10 basis points to 4.91%. In the currency market, the dollar index plummeted by 0.9% to around 98, hitting a 16-month low.
However, in stark contrast to the dismal performance of dollar assets, Bitcoin surged against the trend, reaching a high of $88,877, marking a new one-month high with a 24-hour increase of 1.42%. Meanwhile, gold continued to shine, with spot gold breaking through strongly, rising 2.90% to $3,423, setting a new historical high.
Harsh Criticism of Powell; Federal Reserve's Neutrality Under Scrutiny
Trump has recently criticized Powell multiple times, accusing him of overly tight policies and threatening to dismiss him, attempting to find a scapegoat for a potential economic slowdown. He has explicitly demanded that the Federal Reserve cut interest rates immediately and has repeatedly stated in various occasions that independent federal agencies should heed presidential directives. The market is concerned that Trump may weaken the Federal Reserve's independence, turning it into a tool for executing presidential economic policies.
Confidence in the Federal Reserve's political neutrality is being tested like never before. For decades, the Federal Reserve has played a central role in the global asset allocation system, with global capital widely allocated to U.S. assets based on trust in the Fed's professional judgment and independence. However, if the Federal Reserve concedes in this power struggle, the effectiveness of its policies will be undermined, its credibility eroded, U.S. Treasuries will no longer be seen as safe-haven assets, and the dollar will lose its premium attributes. This will trigger a reassessment of the entire global asset anchoring system.
Currently, Wall Street generally believes that the Federal Reserve's choice to cut rates last year and now to "hold steady" is a reasonable response to actual and expected economic developments, rather than a political consideration. Whether the Federal Reserve will be pressured by political forces to accelerate rate cuts, or if Powell will be replaced, is becoming a new uncertainty following Trump's tariff policies.
Shift from Dollar Assets to Gold and Bitcoin for Safety
In recent years, Bitcoin and U.S. stocks, especially tech stocks, have shown a strong correlation. However, data from April shows that the correlation coefficient between Bitcoin and the Nasdaq has plummeted from 0.6 at the beginning of the year to 0.35, while the negative correlation between gold and the S&P 500 has strengthened to -0.42 during the same period. This shift was reinforced on Monday when tech stocks fell by 4%, while Bitcoin broke through key resistance levels, and gold surged nearly 3% in a single day.
The reason behind the shift in capital flows is that when independent monetary policy may be subject to intervention by executive power and thus become a political tool, global capital will proactively reassess what constitutes truly credible assets.
Gold, with its limited supply and scarcity over thousands of years, does not rely on national credit and is not subject to policy intervention, providing a form of temporal independence and historical stability in a complex and ever-changing financial world. Bitcoin, praised as digital gold due to its similar attributes, has an absolute scarcity of 21 million coins, making it another major option for value storage when dollar credibility is damaged.
The rise of gold and Bitcoin reflects the market's distrust in the credibility of sovereign currencies, which is also a strong signal of the maturation of the Bitcoin market. If the Federal Reserve's independence continues to be undermined, safe-haven funds may further flow into non-sovereign assets.
Moreover, in the face of the rare simultaneous decline of U.S. stocks, Treasuries, and the dollar, the "triple kill" scenario may force the Federal Reserve to act sooner than expected, cutting rates or even restarting quantitative easing to stabilize the dollar and the bond market. From this perspective, this may also be one of the most favorable macro narratives for crypto assets currently.
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