On Monday, all major stock market indices experienced significant declines, with the Dow Jones Industrial Average, S&P 500, and Nasdaq-100 each dropping by approximately 3%, continuing a recent downward trend.
The primary cause of these declines is attributed to President Donald Trump’s escalating pressure on Federal Reserve Chairman Jerome Powell to reduce interest rates. Trump took to social media to caution that the U.S. economy could decelerate if interest rates are not lowered promptly, urging Powell to take action.
Trump’s criticisms of the Federal Reserve and Powell, despite appointing him during his first term, are not new. Before the COVID-19 pandemic, Trump frequently criticized Powell for raising interest rates despite the absence of inflation concerns.
The current situation differs as Trump has publicly mentioned the possibility of Powell’s “termination,” although he does not appear to have the legal power to dismiss the Federal Reserve Chair. Under current law, even Congress cannot remove a Fed chair before their term ends. Reports suggest that Trump’s legal team is exploring whether he can remove Powell from his position.
Powell’s term as Federal Reserve chair is set to expire in May 2026, and he has expressed a clear intention to serve until the end of his term, stating that Trump lacks the legal authority to oust him. Powell has also cited Trump’s trade war as a potential reason for maintaining elevated rates, suggesting that tariffs could lead to inflation while hindering economic growth. Recently, Powell mentioned that the Fed is “well positioned to wait for greater clarity before considering any adjustments to our policy stance,” indicating no immediate plans to lower rates despite Trump’s critiques.
Investors appear concerned about the implications of these developments. The independence of the Federal Reserve has long been a cornerstone of the U.S. financial system. Warnings have been issued by financial experts and politicians about the potential consequences if Trump attempts to remove Powell. Senator Elizabeth Warren warned that such a move could trigger a stock market crash, while Evercore ISI Vice Chairman Krishna Guha predicted a likely market sell-off. CNBC senior analyst Ron Insana noted that global confidence in the United States could be adversely affected.
Signs of investor concern are already emerging. Alongside the stock market drop, the U.S. dollar has weakened to its lowest level since the 2022 bear market. In contrast, “safe” assets such as gold have reached record highs. The stock market is generally averse to uncertainty, and the recent activity reflects this sentiment. The CBOE Volatility Index (VIX), regarded as a key indicator of investor anxiety, has more than doubled from its level right after the November presidential election.
For investors, the key question is whether to worry or look for opportunities. Long-term investors are advised not to panic and sell assets intended for long-term holding, as long as the original reasons for purchasing them remain valid. Caution is recommended when investing new funds in fast-growing or speculative companies, due to the unpredictable nature of the current market volatility.
Adopting strategies like dollar-cost averaging to gradually build positions in favored stocks or ETFs is prudent. Historically, when the S&P 500 experiences a pullback of more than 15% from recent highs, as it has in 2025, it is considered a good time to invest from a long-term perspective, though further declines are still possible, meriting caution in navigating this uncertain market environment.
