OP 2019: Trump tells Powell 'you’re fired'
Outrageous Predictions

OP 2019: Trump tells Powell 'you’re fired'

John J. Hardy
Global Head of Macro Strategy

Summary:  Long-simmering tensions between US President Donald Trump and the chairman of the Federal Reserve come to a head and Jerome Powell is dismissed. His replacement's new policies shock many people, especially savers.

For the full list of Saxo's 2019 Outrageous Predictions, click here.


At the December 2018 Federal Open Market Committee meeting, Federal Reserve chair
Jerome Powell signs on with a slim majority of voters in favour of a rate hike, even as
corporate credit spreads are spiking higher and equities are showing signs of strain.

The hike is at least one too many and the US economy and US equities promptly drop
off a cliff in Q1’19. Rather than riding to the rescue, the Powel l Fed indicates that it
would be inappropriate to restart the serial bubble-blowing machine former Fed chair
Alan Greenspan revved up as far back as the ‘90s. Instead of another incarnation of
QE, the Powell Fed merely tinkers with the pace of quantitative tightening and a
one-off rate cut.

Powell argues that a clearing of bad debts could have long-term benefits. By the
summer of 2019, with equities in a deep funk and the US yield curve having moved to
outright inversion, an incensed President Trump fires Powell and appoints Minnesota
Fed President Neel Kashkari in his stead.

The ambitious Kashkari was the most consistent Fed dove and critic of tightening US
monetary policy. He is less resistant to the idea of the Fed serving at the government’s
pleasure and is soon dubbed ‘The Great Enabler’, setting President Trump up for a
successful run at a second term in 2020 by promising a $5 trillion credit line to buy
Treasury Secretary Mnuchin’s new zero-coupon perpetual bonds to fund Trump’s
“beautiful” new infrastructure projects and force nominal US GDP back on the path it
lost after the Great Financial Crisis.

Under Kashkari’s bold nominal GDP forcing, nominal GDP growth rises at a 7% clip,
with inflation running at 6% (even if reported at 3%), while Fed policy is all the way
down at 1%. That enables deleveraging you can believe in via fin ancial repression to
the great “joy of debtors and great detriment of savers.

Quarterly Outlook

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.