Timothy St. John•Friday, January 24, 2025•2 min read
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Shortly after Donald Trump had taken office as the next US President, he was already targeting the Federal Reserve and interest rates, promising to try to bring those rates down.
US President Donald Trump spoke at the World Economic Forum in Davos, Switzerland on Thursday and said he would act immediately to put pressure on the Federal Reserve for interest rates to come down. If he is successful, that would mean the stock market would be affected dramatically in the near future.
Trump continued in his statement to say that he would expect interest rates will drop around the world as other nations follow the United States. It is worth noting that Trump did not get along well with Federal Reserve officials the last time he was in office constantly butting heads. Right out of the gate at the beginning of his second term, he is drawing the battle lines with them using bold statements.
Trump’s criticism of Fed chairman Jerome Powell was no secret, and he could continue that conflict through this term as well. However, it is clear that he has not spoken to Powell yet, but says he plans to in the near future.
The Stock Market Reacts
We saw the markets jump yesterday after Trump’s swearing in, with positive sentiment having its day and bringing up most of the indices by 2% or more for the week. The S&P 500 continued its positive streak and rose by 0.5%. It has gained 2% this week. The Dow Jones climbed almost 2.5% this week, and the Nasdaq Composite gained 2.2%.
If there is an incoming interest rate cut, that should improve sentiment further and raise the stock market, but there could also be economic blowback from the move. The Fed was cautious about dropping interest rates in 2024, only allowing those cuts to happen near the end of the year. They have changed their plans for 2025 cuts once already and decided that there would be fewer cuts than initially planned and that these would all be minor. Trump has other plans for interest rate cuts, however.
We should continue to see an impact on the stock market from moves made by Trump and his cabinet over the next few weeks. Even casual comments by Trump could move the market, since he has already issued more than 100 executive orders since coming into office. It is clear that Trump is wasting no time in getting started on his plans for change as President.
Timothy St. John
Financial Writer – European & US Desks
Trump Takes Aim at Interest Rates
Donald Trump is attempting to bring interest rates down and has called out the Federal Reserve.
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