Markets swung hard on rumors Trump wanted to fire Fed Chair Jerome Powell. If it actually happens, as retail traders we should expect fireworks and potentially big trading opportunities.
What exactly happened?
Today around 4pm GMT the market spiked wildly as reports surfaced that US President Donald Trump discussed removing Fed Chair Jerome Powell during a meeting with senior officials and republican lawmakers.
The unconfirmed rumour sent markets into panic mode:
S&P500 fell 0.8% before rebounding.
USD Index slipped by 1%.
Gold prices momentarily rallied by 1.25%.
I say the rumour was unconfirmed because President Trump stated he was “not planning” on firing Powell, which helped the market sell off retreat.
Why Does This Matter?
This for one shows us how sensitive the market could be to this news. Which gets the alarm bells ringing in my head. If the market cares, we should care.
The Fed’s independence is a cornerstone of global market stability.
If Powell is fired (which is technically illegal in the US) then the implications could be huge.
Uncertainty could be at an all time high, which would likely see volatility rise.
Stock markets could drop hard in line with the rally in volatility.
Trading Options For Me
Patience is going to be the key for me in these scenarios.
At the beginning of the year, I said the best strategy could be to wait for the VIX to rise sharply, and then look to fade the move.
Well if Jerome Powell gets fired, that is exactly what I am going to look for.
I will try to wait for the spike of the VIX and then when it reaches a significant level, I will look to fade the move.
Final Thoughts
The odds of Powell actually being fired remain low, Trump himself said it’s “highly unlikely.” But now that the idea has entered market psychology, any future hint of Powell being undermined could trigger rapid volatility.
For retail traders, that’s not a reason to panic. It’s a reason to prepare. Sharp dips and volatility spikes are often where the best opportunities live.