Chicago Board Options Exchange’s CBOE Volatility Index
Source: Bloomberg
Tariff Policy Changes
On April 2, the Trump administration announced sweeping reciprocal tariffs on dozens of trading partners, including particularly onerous tariffs on China. This triggered a swift and severe retaliatory response from China, and after a few rounds of back-and-forth escalation, tariffs on trade between the two countries settled at more than 100%. News of the tariffs shocked global investors, stocks fell sharply, bond yields rose, and the value of the U.S. dollar fell compared to other major currencies.
Seemingly in response to the extreme turmoil in financial markets, on April 9, President Trump announced a 90-day pause on the implementation of most tariffs, excluding those targeting China. Investors responded very positively to the decision, as stocks posted their third-largest one-day percentage gain since World War II (CNBC).
Federal Reserve Independence Under Pressure
On Thursday, April 17, President Trump stated via social media that Federal Reserve Chairman Jerome Powell’s termination “cannot come fast enough.” (TruthSoical) The following day, a senior administration official told reporters that the White House was exploring the legality of removing Powell. This rhetoric alarmed investors, who view Fed independence as critical to sound monetary policy, especially inflation vigilance.
Stocks opened sharply lower on Monday, April 21, falling more than 4% before partially recovering later in the day. Trump seemingly took notice of financial markets’ rebuke of the idea, because on Tuesday, April 22, the president told reporters he had no intention of firing Powell. Stocks opened sharply higher the following day, signaling investors’ relief.
Our View on Tariffs
We have held the view that the Trump administration’s tariff announcements are intended as a negotiating tactic to secure more favorable trade agreements for the United States. Despite a severely negative reaction by financial markets to the reciprocal tariff announcements in early April, more recent comments and actions by the White House validate our perspective. While markets may react negatively to further tariff escalation threats or perceived setbacks in negotiations, we believe such dips are likely to be good buying opportunities. In our opinion, declining financial asset prices and public pressure will push the U.S. and its trading partners toward compromise, which we believe is likely to ultimately lift stock prices.
Our View on Federal Reserve Independence
The Federal Open Market Committee (FOMC) sets monetary policy based on a majority vote. No individual, including the chairman, can set policy on his or her own.
The FOMC is comprised of 12 members:
- Seven members of the Board of Governors (appointed by the President, confirmed by the Senate to staggered 14-year terms)
- The President of the Federal Reserve Bank of New York
- Four presidents from the remaining 11 regional Reserve Banks (rotating)
Current FOMC Members and Voting Term End Dates
- Jerome Powell: Board of Governors, Chair, May 2026; Board January 2028
- Adriana Kugler: Board of Governors, January 2026
- Lisa Cook: Board of Governors, January 2028
- Chris Waller: Board of Governors, January 2030
- Michael Barr: Board of Governors, January 2032
- Michelle Bowman: Board of Governors, January 2034
- Philip Jefferson: Board of Governors, January 2036
- John Williams: New York, February 2026
- Susan Collins: Boston, January 2026
- Austan Goolsbee: Chicago, January 2026
- Alberto Musalem: St. Louis, January 2026
- Jeffrey Schmid: Kansas City, January 2026
The requirement of a majority vote to change policy, staggered terms of Fed Board Members, and Senate or independent board of directors’ approval to confirm new Fed Board Members are significant protections to Fed independence.
Furthermore, under current law, Fed Governors can only be removed for cause–a high threshold interpreted by courts to mean misconduct or incapacity.
Finally, we believe efforts to undermine this independence by the president of the United States would likely backfire. Financial markets would likely respond negatively to such an attempt, pushing interest rates higher and stock prices lower, outcomes contrary to presidential desires. The events of the past week appear to confirm this dynamic, and we expect any future attempts to undermine Fed independence would produce a similar outcome.
The Evolving Landscape
We’re continuously evaluating developments on the political, market, and economic fronts to inform our broader outlook. While uncertainty is a constant, so is our commitment to staying thoughtful, disciplined, and proactive in how we interpret and apply new information. As the landscape shifts, we’ll continue to adapt our thinking and share timely, relevant insights with clarity and context. In the meantime, we welcome any questions you may have—we’re here to talk through the noise and provide perspective whenever possible.
This material is for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. The views expressed herein are those of the authors at the time of publication and are subject to change without notice. Any forward-looking statements or forecasts are based on assumptions and expectations in light of currently available information, and actual results may differ materially. There is no guarantee that any views or opinions expressed will come to pass. Market data and performance figures cited are for illustrative purposes only and may not reflect actual investment results. Past performance is not indicative of future results. Investing involves risks, including the potential loss of principal. This commentary may contain references to political, regulatory, or economic events that are inherently unpredictable and may impact financial markets in ways that cannot be anticipated. The information herein should not be considered a comprehensive analysis of the topics discussed. All information is believed to be accurate at the time of writing, but we do not guarantee its completeness or accuracy. Clients should consult their financial advisor for advice specific to their situation. Howe & Rusling is an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration with the SEC does not imply a certain level of skill or training and does not constitute an endorsement by the SEC.
