The labor market report released on Tuesday did not cause much of a stir. Everything was as expected: actual figures are in line with forecasts and on par with the previous month, while core inflation is even slightly lower. However, this may not last long, given the political and macroeconomic processes taking place in the US and around the world in general. So, there was no violent market reaction. But investors did not have to be sad either, because the colorful personality of the American president and his penchant for unconventional behavior are the best guarantee that the markets will definitely be fun. This is a quick review from Ivan Kompan, Edinburgh Business School analyst.
Trump appears to have “smelled blood.” Realizing that laws and international rules — which he never particularly respected — deliver limited results, he launched the new year with an aggressive show of U.S. military power, giving markets no time to ease into January. A large-scale operation in Venezuela, threats toward Colombia and Mexico, seizures of Russian tankers, ambitions regarding Greenland, and other bold ideas quickly erased the holiday mood, forcing investors to adjust strategies amid presidential unpredictability.
Trump ultimately stayed out of Iran. He struck a threatening pose, rattled sabers with words and tweets, but at the last moment seemingly chose not to upset his Moscow friend or interfere in the internal affairs of the modern “axis of evil.” Having secured a brief pause on external fronts, Trump turned his attention to domestic enemies — one of them being Jerome Powell. Powell stubbornly refuses to accept that the Great One understands absolutely everything better than anyone else, including macroeconomics and monetary policy, and that everyone should simply follow his advice. If Trump recommends cutting rates, then rates should be cut — not this “we’re not sure… the data will tell… let’s see how things unfold.”
Powell, however, has his own view. He fears inflation could return — and not without reason — so he is in no rush to cut rates further, especially against the backdrop of economic growth and rising equity and real estate prices. Last week’s labor market report likely reinforced Powell’s belief that the Fed is “exactly where it should be” on rates, and inflation data hardly shook that confidence.
Trump eventually lost patience with Powell’s defiance and decided to act tough. On Sunday evening, the Department of Justice issued a subpoena to the Fed Chair, accusing him of misleading Congress about renovations to the central bank’s building. The Fed and the White House are now effectively at war. Formally, it’s about renovations, but markets see it as retaliation for Powell’s refusal to obey presidential orders. As if that weren’t enough, midweek Trump publicly called Powell a “jerk” and hinted at corruption. Frankly, this is odd — Powell leaves office in May, and Trump could simply wait, appoint a loyal successor, and avoid spooking markets. But the President of the United States, Temporary Ruler of Venezuela, Future Owner of Greenland, and Potential Ruler of the Universe surely knows better.
From Wall Street’s perspective, Trump’s attack on Powell is a mistake. Undermining Fed independence and forcing monetary easing could trigger serious economic consequences. This week, JPMorgan CEO Jamie Dimon publicly opposed Trump’s actions, stating that “attacking the Fed is a bad idea.” That alone signals how Wall Street may react to further pressure on the central bank.
Another of Trump’s “brilliant” ideas — capping credit card interest rates to help ordinary Americans — also found little support among bankers and investors. Bank of America’s CEO criticized the proposal bluntly: cap rates, credit disappears; no credit means no consumption; no consumption slows the economy. Simple. If Trump doesn’t grasp this, he could always call his Ukrainian counterparts and ask how price controls on fuel or medicine usually end. Our experts could explain. But instead, he chose to learn the hard way.
Quarterly results from major banks added some optimism, except for JPMorgan, which missed expectations on both revenue and profit. Dimon warned that while the economy is holding up, investors are underestimating risks tied to geopolitics, inflation, and high asset prices. Other big banks remain optimistic — and are aggressively laying off staff, replacing or planning to replace them with AI.
On the tech front, everything is fine too — after all, “this time it’s different.” And if old-timers like Buffett, Dalio, or Marks express doubts, why listen? Make way for the young. Taiwan Semiconductor Manufacturing boosted investor morale with strong results and upbeat guidance along the lines of “AI is real.” Nvidia’s newly granted permission to sell processors to China further strengthened sentiment.
That said, Nvidia’s future isn’t entirely rosy. Despite U.S. approval to sell H200 chips to China (albeit with a 25% tax), Reuters reports that China may ban imports of these chips except in “special cases” — whatever that means. It’s reasonable to assume Nvidia’s China revenues will keep shrinking. Last quarter, sales there fell 45%, and if the trend continues, prospects won’t look cheerful. And this isn’t just Nvidia — the U.S.–China trade war is far from over.
What’s next? We’re still waiting for the U.S. Supreme Court’s decision on tariffs, watching developments around Greenland (who would’ve imagined the White House negotiating this with Denmark and Greenland’s representatives?), bracing for new insults and paranoid attacks on Powell, and following events in Iran — though the likelihood of U.S. involvement in regime change is rapidly declining.
*And finally, we would like to remind you that the information you have just listened to is not an investment advisory. Remember – investments in the stock market are always tied up with financial risks. So be careful and cautious.
