Global Markets Remain Volatile as Investors Await Fed Decision and Trump’s Reaction
The S&P 500 closed down 0.64% on Monday, marking the end of a nine-day winning streak for the broad U.S. index. The decline was led by consumer staples and energy stocks, which fell 1.4% and 2.3%, respectively. Meanwhile, the S&P futures were down 0.69% pre-opening in New York, setting the stage for another potentially volatile trading session.
Despite the decline, markets in Asia and Europe largely rose this morning, with the Shanghai Composite Index up 1.1% and the Nikkei 225 up 1%. However, the gains were short-lived as S&P futures dropped about 0.7%, indicating that investors remain nervous ahead of the Federal Reserve’s interest rate decision on Wednesday.
The Fed is widely expected to keep interest rates steady in the 4.25-4.50% range, but analysts believe that President Trump will continue to apply pressure on Fed Chair Jerome Powell to lower rates. This could lead to further market volatility and potentially even a recession.
"The attacks on Powell are going to escalate a lot," said Jeremy Siegel, emeritus professor of finance at the Wharton School of the University of Pennsylvania, in an interview with CNBC. "Trump, I think, is going to step up the escalation."
Siegel’s comments reflect the growing concern among investors that Trump’s attacks on Powell are undermining confidence in the Fed’s independence and ability to set monetary policy without political interference.
"This is a threat to the Fed’s autonomy, which is essential for maintaining inflation expectations and ensuring long-term stability of financial markets," noted Gregory Daco, chief economist at EY-Parthenon. "A sustained loss of confidence in the Fed’s autonomy risks de-anchoring inflation expectations, lifting long-term yields, raising debt servicing costs, and undermining demand for dollar assets."
Daco’s warning highlights the potential risks associated with a loss of confidence in the Fed’s ability to set monetary policy independently. This could have far-reaching consequences for financial markets and the economy as a whole.
Global Growth Remains Solid Despite Market Volatility
Despite the recent market volatility, global growth remains solid, according to recent data releases from major economies around the world. The data show that global GDP grew at a trendlike 2.4% in 1Q25, with available April readings indicating sustained momentum as we turn into the current quarter.
"The data are sending a straightforward message that global growth remains solid," wrote Bruce Kasman and his team at JPMorgan Chase. "Despite a noisy stall in the US, global GDP grew at a trendlike 2.4%ar in 1Q25."
The resilience of global growth is a welcome sign for investors who are nervously awaiting the Fed’s decision on interest rates. While the market volatility may be unsettling, it is essential to keep things into perspective and consider the broader economic picture.
A Snapshot of Today’s Action
Here’s a snapshot of today’s action in major markets:
- The S&P 500 declined 0.64% yesterday following nine straight days of gains.
- President Trump’s announcement of a 100% tax on American movie production in foreign countries sent Netflix down 2%, Paramount down 1.6%, and Disney down 0.4%.
- S&P futures pointed to more gloom today: Contracts were priced down 0.8% in premarket trading.
- The VIX fear index is up 9% today, indicating growing anxiety among investors about the potential for market volatility.
Conclusion
The global markets remain volatile as investors await the Fed’s decision on interest rates and Trump’s reaction to the outcome. While the recent decline in the S&P 500 may be unsettling, it is essential to keep things into perspective and consider the broader economic picture. Global growth remains solid despite market volatility, and this should provide some comfort to investors who are nervously awaiting the Fed’s decision on interest rates.
However, the potential risks associated with a loss of confidence in the Fed’s autonomy cannot be ignored. A sustained loss of confidence could have far-reaching consequences for financial markets and the economy as a whole. As such, it is crucial that policymakers and market participants work together to maintain stability and avoid any further escalation of tensions.