Financial markets wrapped up the week on a positive note, buoyed by a joint appearance by Federal Reserve Chairman Jerome Powell and President Trump on Thursday. During this rare collaboration, both figures maintained their positions.
The S&P 500 climbed by 0.4%, while the Dow Jones gained 208 points, a rise of 0.47%.
Meanwhile, the high-tech Nasdaq composite saw a modest increase, surpassing 21,108.
As noted by Morningstar, some top performers included USA, Belfuges, Deckers Outdoor Corporation, and IES Holdings.
The bond market also showed signs of cooling down on Friday, with Treasury yields slipping after midday trading.
This year has seen significant stress in the bond market, largely due to Trump’s trade policies. A Financial Times analysis using EPFR data revealed that long-term outflows from U.S. public and private bond funds reached nearly $11 billion in the second quarter.
The profits garnered on Friday followed a tense exchange between Trump and Powell the previous day, which wasn’t tweeted but aired live on television.
This interaction unfolded at a construction site where the Fed’s facilities are under renovation, a project that has faced criticism for cost overruns.
During the appearance, Trump stated that the overruns were worse than previously thought, surprising Powell, who was caught off guard. Trump even provided documents to back his claims.
Powell responded, saying, “We just added it to the third building.”
Trump countered, asserting, “It’s a building being built.”
Powell then clarified, “No, it was built five years ago.”
Trump insisted, “It’s part of the overall job.”
Powell pushed back again, countering, “It’s not new.”
The president, perhaps realizing the back-and-forth was getting nowhere, moved on.
An analysis of Powell’s demeanor in front of the camera suggested that he held his ground against the president’s pressure, similarly to his stance on interest rates.
The root of their disagreement lies in the Fed’s reluctance to resume interest rate cuts, a situation exacerbated by Trump’s inflammatory remarks. He has taken to name-calling—often referring to Powell derisively—and expressing frustration over the Fed’s rate hike in response to inflation that many believe was delayed.
The Fed is currently hesitant to cut rates further, especially with Trump’s tariffs still looming. The consumer price index saw an annual increase of 2.7%, up from 2.4% in May, aligning with predictions that businesses would pass import costs onto consumers.
Last week, rumors circulated that Trump sought to fire Powell, though he later deemed it “very unlikely.”
Market reactions to the idea of Powell’s ousting suggested it would face significant legal challenges and undermine the traditional independence of the Fed, according to financial analysts.
Despite ignoring these concerns, Trump’s frequent public critiques have already begun to erode the Fed’s perceived independence.
Claudia Sahm, a chief economist and former Fed economist, remarked, “With repeated public criticism of Powell by the White House and explicit instructions from the president on interest rates, we are already moving along that spectrum.”
Additionally, while specifics are sparse, there seems to be some market enthusiasm following announcements of new trade agreements this week.
On Tuesday, Trump unveiled trade deals with Indonesia, the Philippines, and Japan as the August 1 deadline approaches for establishing new “mutual” tariffs.
Although details, aside from the tariff rates—19% for Indonesia and the Philippines, and 15% for Japan—remain unclear, it’s uncertain which products will be affected.
Earlier this year, stocks surged when it was revealed that the proposed deal with China would effectively result in a tariff rate around 50%.
