Battle Lines Are Drawn: Powell vs. Trump Fight to the Finish!

During the prior presidential administration, Jerome Powell and the Federal Reserve were eager to use their “tools” to support the U.S. economy. Now, with around 12 months left, Powell is putting his tools away and effectively leaving American families and businesses to fend for themselves.
 
Overall, the constant changes are making it tough for retail investors. Symbolic of all this change is the retirement announcement of Warren Buffett, who will step down at the end of 2025 after serving as Berkshire Hathaway’s CEO for 55 years.

Much like Tim Cook took over the Apple CEO position from Steve Jobs, Greg Abel will succeed Buffett at Berkshire Hathaway and investors will have to adjust. And just as Apple didn’t collapse after the CEO change, Berkshire will continue to exist after Buffett steps down.

Powell’s term as Federal Reserve chairman will end in May of 2026, so that’s another change that investors will have to face down the road. Then, President Trump will pick someone to replace Powell and a major changing of the guard will be in effect.

You might look forward to that change, but for the next year, there will be a President and a Federal Reserve with separate goals and different views of how to manage the nation’s economy. When America’s leaders aren’t all on the same page, there could be turbulence in the financial markets because stock and bond investors don’t like uncertainty.

Courtesy: CNBC

 
Powell didn’t exactly use the word “stagflation,” but he hinted at it when he proclaimed, “The risks of higher unemployment and higher inflation have risen.” Yet, even while basically declaring an economic emergency, Powell refuses to make a monetary policy move, saying, “It’s not a situation where we can be preemptive.”

To put it another way, the Fed is planning to be reactive rather than proactive. If there’s massive inflation or a sharp rise in unemployment, Powell will finally take action to try and fix what’s been broken.

That’s akin to a doctor refusing to use preventive medicine because he’d rather just wait until the patient gets sick and then deal with it. It might be the ideal approach to fixing America’s problems, but the nation will have to adapt to whatever disruptions may occur in the near term.

And don’t expect Powell to reach out to the President during his final year as Fed chairman. “I’ve never asked for a meeting with any president, and I never will,” Powell stated at the recent Fed meeting.

Courtesy: @bespokeinvest

It takes a forward-thinking mind-set to see this as good news and a great opportunity. Unfortunately, many amateur traders will get nervous and miss out on a chance to own a piece of some high-performing businesses at unusually attractive prices.

Sure, you can always come up with reasons to stay out of the financial markets if that’s your mind-set. After all, the future doesn’t look too bright if America’s central bank is playing a game of chicken with the economy and markets.

On the other hand, it’s the hardest hit assets that can stage the biggest rebound when the tide of sentiment shifts. Plus, you can build your positions in carefully selected small-cap stocks as their prices fluctuate, while also diversifying your portfolio with an inflation buffer.

Of course, the most obvious inflation buffer is gold, though silver and even Bitcoin are also worth a close look. In the end, these assets can help to protect your wealth against whatever the Fed chairman might choose to do during his final 12 months — or what he might choose not to do despite the economy’s long-standing problems.