QUESTION: With growing talk of a possible Powell resignation, how can advisors adjust client portfolios or messaging if the Fed chair changed?
RESPONSE: The current situation surrounding Federal Reserve Chair Jerome Powell involves significant political pressure from the Trump administration, which has been calling for Powell’s resignation and criticizing his handling of interest rates[1][2][3]. The administration has even suggested appointing a successor before Powell’s term ends in May 2026[4][5]. Analysts have warned that if Powell were to be removed or step down before his term ends, U.S. government debt yields would likely surge, raising the cost for the government to borrow money[6].
Given this context, financial advisors might consider the following strategies:
- Interest Rate Sensitivity: If Powell were to resign and a new chair were appointed with a mandate to lower interest rates, advisors might anticipate a potential decrease in interest rates. This could affect fixed-income investments, making longer-duration bonds more attractive due to potential price increases as yields fall.
- Market Volatility: The uncertainty surrounding a change in Fed leadership could lead to increased market volatility. Advisors might consider diversifying portfolios to mitigate risk, potentially increasing allocations to assets that historically perform well during volatile periods, such as gold or other commodities[7].
- Communication Strategy: Advisors should prepare to communicate with clients about the potential implications of a Fed leadership change. This includes discussing the possible impacts on interest rates, inflation expectations, and overall market sentiment. Clear communication can help manage client expectations and reduce anxiety during periods of uncertainty.
- Monitoring Economic Indicators: Keeping a close eye on economic indicators and Fed communications will be crucial. Any hints of policy shifts or changes in economic outlook should be factored into portfolio adjustments.
Overall, while the situation remains fluid, advisors should remain vigilant and responsive to developments, ensuring that client portfolios are positioned to weather potential changes in Fed policy and market conditions.
References
[1] The Latest: The House returns in a rush to pass Trump’s bill Trump shared an article on Truth Social about calls for Powell to be investigated over testimony he gave before Congress last week, but Trump said: “‘Too Late’ should resign immediately!!!”
[2] What To Expect From The Fed’s July Interest Rate Decision [Forbes] President Trump has been vocal in calling for lower rates, and has repeatedly criticized Fed Chair Jerome Powell, going as far as to call for his resignation on July 2. https://www.forbes.com/sites/simonmoore/2025/07/08/what-to-expect-from-the-feds-july-interest-rate-decision/
[3] White House escalates pressure campaign on Federal Reserve by targeting its headquarters renovation On Wednesday, Trump said Powell “should resign immediately” so “we should get somebody in there that’s going to lower interest rates.”
[4] Most Fed Officials Expect 2025 Rate Cuts Despite Tariff Inflation Concerns, Minutes Show [Forbes] After appointing the now out-of-favor Powell in 2018, Trump will have the opportunity to choose Powell’s successor, with the banker’s term due to expire in May. https://www.forbes.com/sites/dereksaul/2025/07/09/most-fed-officials-expect-2025-rate-cuts-despite-tariff-inflation-concerns-minutes-show/
[5] Finding The Right Leader For Your Company’s AI Strategy [Forbes] While Trump has said he will let Powell serve to the end of his term next May—even though he constantly berates him—the Wall Street Journal Trump may name Powell’s successor this fall, allowing a “shadow” Fed chair to operate and share their preferred policy choices—something analysts have said would definitively undermine Powell. https://www.forbes.com/sites/meganpoinski/2025/06/30/finding-the-right-leader-for-your-companys-ai-strategy/
[6] White House ramps up pressure on Fed’s Powell three weeks before next interest rate decision [NBC News] “In the unlikely event that Fed Chair Powell is removed or steps down before his term ends in May 2026,” U.S. government debt yields would likely surge, raising the cost for the government to borrow money, analysts at ING said Friday. https://www.nbcnews.com/business/economy/trump-admin-attacks-federal-reserve-chair-jerome-powell-what-to-know-rcna218343
[7] Gold rises on weaker dollar, tariff uncertainty before deadline [CNBC] Bessent said the administration is considering using the next expected Fed Board of Governors vacancy in early 2026 to appoint a successor to Powell. https://www.cnbc.com/2025/07/01/gold-rises-on-weaker-dollar-tariff-uncertainty-before-deadline.html