As investors get ready for the end-of-summer Labor Day holiday, it’s a good time to ask what to expect from markets when autumn leaves start falling.
On the day technology darling Nvidiareports earnings, it’s clear President Donald Trump has taken a leaf out of the playbooks of tech tycoons Elon Musk and Mark Zuckerberg—move fast and break things.
Trump is ripping up the post-World War II manual on how the economy should work—and it turns out tariffs were just the prelude. The most recent attack on the Federal Reserve is but one episode in a long series—no matter the outcome, the central bank is clearly less independent than it used to be.
Tariffs, it’s clear, aren’t really trade policy, as shown by the latest 50% rate on India in retaliation for buying Russian oil. The U.S. is taking a stake in chip maker Intel, and may look at defense contractors next. Trump is able to arbitrarily shut down whole industries such as wind power, while giving a huge boost to cryptocurrencies. Even the president’s offhand thoughts on a logo were enough to change restaurant chain Cracker Barrel’s strategy and send its stock higher.
It’s not just the attempt to fire Fed Gov. Lisa Cook that’s unprecedented, it’s everything. Some say the U.S. is like an emerging market now, others may call it the ideological triumph of China’s centralized economic model over the Western one.
If the question is what all this means for stocks, the answer as always is that no one knows. With artificial intelligence booming it’s feasible, even likely, that they continue to rise for months or years to come. But don’t forget that it’s Trump’s stock market now. To live in it, investors will have to go back to school.
—Brian Swint
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Trump Escalates Fed Fight. It’s a Challenge to Independence.
President Donald Trump’s move to fire Federal Reserve governor Lisa Cook could ignite a constitutional clash. He is already signaling a move to consolidate control over the independent Fed, telling a roomful of people at a cabinet meeting on Tuesday that he would soon have a majority on the board.
- With that majority in place, the Fed could presumably work at Trump’s behest. Currently his wish is for lower interest rates, citing high mortgage rates, but Fed officials have held off on cuts. “We’ll have a majority very shortly,” Trump said during a televised cabinet meeting. “So that’ll be great.”
- Mortgage rates are not controlled or set by the Fed, although its benchmark interest rate can indirectly influence them. The comments come after Trump abruptly announced the removal of Cook from the board. Cook said she wasn’t resigning, saying there’s no cause under the law for her removal.
- Cook’s attorney, Abbe David Lowell, founder of Lowell & Associates, said Tuesday that Trump has no authority to remove her. “His attempt to fire
her, based solely on a referral letter, lacks any factual or legal basis. We will be filing a lawsuit challenging this illegal action.” Trump said Tuesday he was ready for a legal fight.
- A Fed spokesperson said it would abide by any court decision on the issue, and so did Trump. If the courts ultimately uphold Trump’s move, he would have three seats to fill by May on the seven-member board. Two current governors voted in favor of a rate cut in July.
What’s Next: There’s a broader issue at play. Fed governors have the authority to approve or veto the reappointment of the 12 regional Fed presidents, who are up for renewal in February. Historically, it’s a routine process. But Strategas Research notes the governors technically can reject or even remove presidents “at will.”
—Nicole Goodkind
After Intel, Commerce’s Lutnick Hints Defense Contractors Could Be Next
Commerce Secretary Howard Lutnick said the federal government is weighing taking stakes in American defense contractors after its 10% stake in Intel. Such a move would be unprecedented, but Lutnick told CNBC that Defense
Secretary Pete Hegseth is “thinking about it.”
- Analysts called it an interesting case study for an industry that doesn’t need capital and isn’t in distress. The government has in the past taken stakes in troubled companies, such as a financial crisis-era stake in General Motors. But defense companies are buying back stock
with excess capital.
- Vertical Research Partners analyst Rob Stallard noted that there are no details of what a deal would look like, but not paying for a stake would contradict the government’s efforts to bring new entrants such as SpaceX and Palantir into the fold.
- Lutnick cited government work by Lockheed Martin, which gets about 70% of its revenue from federal contracts. Lockheed said it is continuing its strong working relationship with the administration to “strengthen our national defense.”
- A company like Boeing could use an equity investment
from the government to pay off debt, notes Jefferies analyst Sheila Kahyaoglu in a Tuesday note. But that doesn’t seem necessary. Boeing raised $24 billion in an equity offering last October that put it on firmer ground.
What’s Next: Kahyaoglu also said government stakes could create an appearance of conflict of interest. “We can only imagine the first protest of an award that goes to a prime [contractor] that the government has an equity stake in over a non-government prime.”
—Al Root and Janet H. Cho
Apple’s Product Event Next Week Could Highlight AI, New iPhone
Apple teased a product event for Sept. 9, and investors immediately set their sights on an iPhone 17 plus updates on the device-maker’s artificial intelligence efforts. CEO Tim Cook hyped the
“awe dropping” event in a social media post. But AI news could be disappointing.
- Already, Apple’s AI software rollout has been slow to catch investor enthusiasm. iPhone users are impatient for an updated Siri chatbot. Apple has said it expects to launch a more pers
