Trump tirade against Fed chief slams rate-sensitive stocks
Goldman Sachs’ basket of rate-sensitive stocks was hit hard on Monday.
Despite the increasingly dire outlook for the US economy, long-term interest rates jumped on Monday after President Trump took to Truth Social to harangue Fed Chair Jerome Powell, yet again, for not cutting interest rates, prompting another sell-off in US assets like the dollar and Treasury bonds.
The TL;DR is that bond owners tend to like an independent central bank that doesn’t cut interest rates when political authorities demand. Why? Well, historically, subservient central bankers tend to generate inflation, which is the worst enemy of long-term bond investors.
Anyhoo, as bond prices fell, interest rates — which move in the opposite direction — rose, and stocks that tend to sell off when rates rise — among them investor favorites like Tesla, Apple, and Super Micro Computer — tumbled.
Goldman Sachs’ basket of such interest-sensitive US stocks was on track for a nearly 4% drop shortly before 2 p.m. ET, their worst tumble since the immediate aftermath of the White House’s Rose Garden tariff unveiling.
That makes sense, as there’s quite a bit of overlap between Goldman’s interest-sensitive stock basket and tech hardware stocks, which analysts have spotlighted as some of the most exposed to the downsides of Trump’s trade war.
But the day’s trading dynamic also underscores the fact that if Trump thinks interest rate cuts are going to be some magic salve for the economy or markets, he may be badly mistaken.
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