US stocks surged on hopes of 100 bps Fed rate cuts in CY25


 

·         If Trump’ attempt to fire Fed Governor Cook succeeds, then Trump will have controlling power of the Fed board and influence to cut rates by 100 bps

·         Trump’ and his loyalists’ 24/7 reality shows indicate an intention to influence Fed policy and control Wall Street, but this may backfire

·         Trump’s tariff policy, secondary sanctions, and USD hegemony may result in US isolation rather than China

·         Wall Street may correct meaningfully in September as valuation is now in a bubble zone; stagflation may be looming


Wall Street Futures and Gold got a boost after Fed ChairPowell indicated an imminent rate cut in September by 25 bps, which may be followed by another 25 bps in December, culminating in 50 bps in 2025 against 100 bps in 2024. But overall, Powell’s Jackson Hole speech on August 22, along with the Fed’s modified policy strategy document, may be indicating that the Fed will be cautious in 2026, considering the looming threat of Trumpflation and thus another projected 50 bps rate cuts in the June’25 dot-plots may not be a done deal yet. Fed may project no rate cuts or only a 25 bps rate cut in 2026 in its September’25 dot-plots; i.e., Fed may opt for a hawkish cut stance in September’25 under the leadership of Powell.

But Trump is thinking otherwise and planning to isolate Powell even before his scheduled exit from the FOMC/Fed by May 15, 2026.  Fed Chair Jerome Powell's term as Federal Reserve Chair is set to expire on May 15, 2026. However, his term as a Federal Reserve Governor extends until January 31, 2028, allowing him to remain on the Board of Governors unless he chooses to step down or is removed for cause, which is a high legal threshold under the Federal Reserve Act. The market believes that Powell may not choose to stay on as a Governor on the Fed board after May 15, 2026, considering Trump’s ongoing public insult.

Trump's Actions to Replace Federal Reserve Governors

President Donald Trump is trying his best to influence the composition of the Federal Reserve's Board of Governors, which consists of seven members who serve staggered 14-year terms. These actions are part of a broader effort to exert greater control over the Federal Reserve, particularly in response to its refusal to lower interest rates as quickly as Trump has demanded.

Attempted Removal of Lisa Cook on an unverified allegation of mortgage fraud

On August 25, 2025, Trump announced he was firing Federal Reserve Governor Lisa Cook, citing allegations of mortgage fraud made by Federal Housing Finance Agency (FHFA) Director Bill Pulte. The allegations claim Cook falsely declared two properties—one in Ann Arbor, Michigan, and one in Atlanta, Georgia—as her primary residence on mortgage applications in 2021, potentially to secure more favorable loan terms. Bill Pulte, a Trump ally, alleged on August 15, 2025, that Cook committed mortgage fraud by designating both a Michigan property and a Georgia condo as her primary residence in mortgage applications in 2021, before her Fed appointment. This could have allowed her to secure lower interest rates, as primary residences typically qualify for better loan terms. Pulte referred the matter to the Department of Justice, which announced an investigation on August 21, 2025.

Meanwhile, Cook has stated that Trump lacks the authority to remove her, as the Federal Reserve Act allows removal only "for cause," typically interpreted as malfeasance or neglect of duty related to official responsibilities. Cook, through her attorney Abbe Lowell, filed a lawsuit on August 28, 2025, in federal court in Washington, D.C., seeking to void her firing and requesting an emergency temporary restraining order to remain in her position. The lawsuit argues that the allegations do not constitute sufficient cause under the Federal Reserve Act and that her due process rights were violated.

Cook has not been charged with or convicted of any crime, and legal experts suggest the allegations may not meet the "for cause" standard, as they relate to personal financial matters before her Fed tenure. A federal judge scheduled a hearing for August 29, 2025, and the case may escalate to the Supreme Court. Trump said he will abide by the court decision. But if Trump really succeeds in removing Cook, whose term extends to January 31, 2038, he could nominate a replacement, potentially securing a majority of Trump-appointed governors on the board.

Temporary Nomination of Stephen Miran as Fed Governor in place of Kugler

Following the resignation of Adriana Kugler, a Biden-appointed Fed governor, on August 8, 2025, Trump nominated Stephen Miran, chair of the White House Council of Economic Advisers, to serve out her term, which expires on January 31, 2026. If confirmed by the Senate, Miran could be renominated for a full 14-year term ending in January 2040. This move, combined with a potential Cook replacement, could give Trump a 4-to-3 majority on the board.

Current Federal Board Composition and Trump’s attempt to control Fed decision making

As of August 2025, the Federal Reserve Board has six members, with one vacancy due to Kegler’s resignation. The current governors are:

·         Jerome Powell (term ends January 31, 2028; Trump-appointed as chair)

·         Michelle Bowman (term ends January 31, 2034; Trump appointee)

·         Christopher Waller (term ends January 31, 2030; Trump appointee)

·         Lisa Cook (term ends January 31, 2038; Biden appointee, under legal challenge

·         Philip Jefferson (term ends January 31, 2036; Biden appointee)

·         Michael Barr (term ends January 31, 2032; Biden appointee)

If Cook is removed and Miran is confirmed, Trump would have appointed four of the seven governors, potentially allowing him to influence monetary policy significantly; also, Powell may not continue as Fed Governor after his Chair term ends on May 15, 2026. Thus, the new Fed Chair to be appointed by Trump will ensure the majority of his appointed Fed Governors, even if Cook continues. The market is now assuming Trump influenced the Federal Reserve Board and at least 100 bps rate cuts in 2026, if not 200-300 bps, as Trump is seeking immediately ahead of the November’26 US mid-term election, in which Trump may face stagflation challenges. Trump has repeatedly criticized the Federal Reserve, particularly Powell, for maintaining high interest rates, which he believes hinder economic growth and increase the cost of servicing the U.S. national debt (over $42 trillion).

The mortgage fraud allegations against Cook echo similar claims made by Pulte against Trump’s political adversaries, such as New York Attorney General Letitia James and Senator Adam Schiff, raising concerns about the politicization of such investigations. Critics, including legal experts and Democratic lawmakers like Elizabeth Warren and Chuck Schumer, argue that these actions threaten the Fed’s independence, which is critical for data-driven monetary policy. The Federal Reserve has emphasized that its governors’ long tenures and removal protections are designed to safeguard independent decision-making. The Fed has stated it will abide by any court decision regarding Cook’s case.

Cook stated she learned of the allegations through media reports and is gathering information to address them. She denies wrongdoing and asserts that the allegations, even if true, do not constitute cause for removal under the Federal Reserve Act, as they predate her Fed tenure and are not related to her official duties. Various legal experts argue that proving mortgage fraud requires demonstrating intent to deceive, which is unclear in Cook’s case. Additionally, actions before her Fed appointment may not qualify as a cause for removal, as the Federal Reserve Act typically limits cause to professional misconduct. Cook’s legal team suggested the issue might stem from an unintentional clerical error, and they argue that Trump’s action violates her due process rights by not providing an opportunity to respond before termination.

Federal Reserve Independence: Trump’s actions, including the attempted firing of Cook and pressure on Powell, have raised significant concerns about the erosion of the Fed’s independence. An independent Fed is seen as crucial for making monetary policy decisions based on economic data rather than political interference. Direct/indirect pressure by various US Presidents on the Fed to cut rates proactively is nothing new, but Trump’s public pressure directly on the Fed Chair and the levels of insulting comments are unprecedented. Also, Trump’s and his team of loyalists’ 24/7 reality show (media bytes) to control Wall Street is unprecedented, equivalent to insider trading.

Following Trump’s announcement to fire Cook, U.S. long-term bond yields increased, reflecting investor concerns about the Fed’s autonomy. The lawsuit filed by Cook could set a precedent for the extent of presidential authority over the Federal Reserve. The Supreme Court’s recent rulings suggest a high bar for removing Fed governors, given the Fed’s unique structure as a quasi-private entity.

Market impact:

Wall Street Futures, Gold surged on hopes of adovish Fed under Trump’s control and more rate cuts in 2026. The S&P 500 soared past 6,500, reaching a record high, driven by robust economic data and sustained AI enthusiasm, despite Nvidia’s mixed earnings and subdued guidance. Wall Street was also boosted by fading concern of a hard landing after Q2CY25 real GDP growth came at 3.2%, higher than the flash estimate of 3.0%. The Nasdaq 100 rose 0.6%, and the Dow edged up 72 points. Nvidia’s 56% revenue jump was overshadowed by its exclusion of China sales from forecasts, slightly pressuring its stock, though analysts remain bullish on AI growth. Tech leaders like Broadcom, Micron, Microsoft, Meta, and Amazon fueled the rally. Earnings standouts included CrowdStrike (+3.9%), HP (+1.5%), and Snowflake (+22.8%).

Weekly Technical outlook: DJ-30, NQ-100, SPX-500 and Gold

Looking ahead, whatever may be the narrative, technically Dow Future (CMP: 45700) now has to sustain over 45600-45800 for a further rally to 46400-46500 and only sustaining above 46500, may further rally to 47100/47200 in the coming days; otherwise sustaining below 45500-45300-44900, DJ-30 may again fall to 44200/43900-43400/42400 and 41700/41200-40700/39900 in the coming days.



Similarly, NQ-100 Future (23600) now has to sustain over 23700 for 24000-24200* and further rally to 24300/24450-24700/25000 in the coming days; otherwise, sustaining below 24250/24000-23750/22900, NQ-100 may again fall to 22400/22200-21900/20900-20700/20200 and 19890/18300-17400/16400in the coming days.



Looking ahead, whatever may be the fundamental narrative, technically SPX-500 (CMP: 6550) now has to sustain over 6600 for a further rally to 6800/7000-7500/8300 in the coming days; otherwise, sustaining below 6575/6525-6500, may fall to 6450-6375/6300-6250/6200 and further fall to 6000/5800-5600/5300 in the coming days.


Technically Gold (CMP: 3372) has to sustain over 3380 for a further rally to 3405/3425*-3455/3475 to 3495/3505*, and even 3525/3555 in the coming days; otherwise sustaining below 3375-3350, Gold may again fall to 3330/3320-3308/3290* and 3255*/3225*-3200/3165* and further to 3130/3115*-3075/3015-2990/2975-2960*/2900* and 2800/2750 in the coming days.



Disclaimer:  I am an NSE-certified Level-2 market professional (Financial Analyst- Fundamental + Technical) and not a SEBI/SEC-registered investment advisor. The article is purely educational and not a proxy for any trading/investment signal/advice.  I am a professional analyst, signal provider, and content writer with over ten years of experience. All views expressed in the blog are strictly personal and may not align with any organization with, I may be associated.

If you want to support independent & professional market analytics, you may contribute to my PayPal A/C: asisjpg@gmail.com

For any professional consultation about the financial market (EQ/COMM/FX), investment, trading ideas, and real-time, professional-grade perfect signals, please DM: ashishghoshjpg@gmail.com or ping me at Telegram id: asisjpg

 

 

 

Ashish Ghosh is a NCFM certified research analyst for the global and Indian financial markets. With more than 15 years of experience in the capital market, Ashish has been published in high-profile online media regularly. He holds a B.Sc. in Math along with NCFM certification for Technical and Fundamental analysis. Presently, he is working with iForex as a financial analyst/content writer since 2017, analyzing mainly the global and Indian markets. You can reach him for professional levels trading ideas or signals through Gmail/telegram ID: ashishghoshjpg/asisjpg

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