ARTICLES

Jerome Powell

The Federal Reserve Bank (“the Fed”) is completely outside the control of the President and Executive Branch of the US government. The chairman of the Fed is appointed for a renewable 4-year term by the President. The President cannot remove the Chair without cause. The current chairman, Jerome Powell was appointed by Trump during his first term as President and reappointed by Biden. Powell is only due to retire in May 2026.

In the economy, the Fed carries out dual functions – to control inflation while at the same time promoting growth. The problem is that these two objectives are often mutually exclusive in the sense that raising interest rates to control inflation generally slows growth down, while lowering interest rates to stimulate growth is usually inflationary.

The Fed’s monetary policy committee (MPC) oscillates between raising and lowering rates according to how they see the economy. Right, now the MPC is reducing rates and has been doing so since last year. So far it has cut 100 basis points, or 1%, off the level of interest rates on the basis that inflation has come down significantly and is close to their objective of 2%.

But this happened before Trump began to implement his new tariffs. Now Jerome Powell, the chairman of the Fed, says that the MPC will have to be more cautious because tariffs are generally inflationary. Luckily, the economy was in a very good place before Trump began his trade wars. The unemployment rate was around 4% and core inflation was 3,1%. This means that the MPC does not have to be in a hurry and can wait to see what the effect of Trump’s tariffs is on the economy before they act.

Trump, of course, is unhappy. He wants the Fed to reduce interest rates dramatically and immediately because reducing rates would stimulate growth and counter the inevitable slow-down in growth due to his tariffs. He is attacking the Fed and its chairman at every opportunity, but there is not much he can do to remove Powell.

Clearly, Trump, like all dictators, would like to control the Federal Reserve Bank – and this is similar to what Zuma tried to achieve in South Africa as part of state capture. Luckily for South Africa the Reserve Bank remained staunch and Zuma was never able to take control of it. Hopefully, the same will be true of America.

Trump’s various policies are making him increasingly unpopular with Americans and there is a strong possibility that the Republicans will lose both the House and the Senate in the mid-term elections if he continues with his trade war. Unfortunately, Trump’s on-again, off-again tariffs are impacting investor perceptions negatively causing them to become more risk-off. This accounts for the steady rise in the gold price to new record levels.

Consider the chart of the S&P500 index since its record high on 19^th February 2025:

Trump’s tariffs began impacting the S&P500 in late February 2025 but gained momentum following his nonsensical tariff formula announced on the so-called Liberation Day (2^nd April 2025).

On the 7^th of April 2025 we tweeted early in the trading session that we saw the S&P falling to as low as 4800 – which was roughly the same as the previous cycle high of 4796.56 made on 3^rd January 2025. In fact, the S&P reach an intraday low of 4835 on the 7th of April this year before turning.

Then Trump announced a 90-day pause for all countries except for China. The 145% US tariff on Chinese imports and the 125% Chinese tariff on US imports will effectively end all trade between the two countries. As part of the trade war, Nvidia has now been prevented from exporting its H20 AI chips to China – which it says will cost it $5,5bn. 

It is obviously very difficult to predict what Trump will do next. His attack on Federal Reserve Bank Chairman, Jerome Powell over the Easter weekend took the S&P down a further 2,36% on Monday. Technically, it looks to us like his influence over the market may, however, be waning and there is increasing motivation for his impeachment in the House. The fact that he has backed down on his original tariffs indicates that he will probably back down further as the political pressure on him increases and his popularity at home plunges.

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PDSNET ARTICLES

Smart Local Investors

The last two months have been wild on the markets – mainly because of Trump’s ill-advised, on-again, off-again tariff policies. The issue now is:

Will this morph into a full-blown bear trend? Or is this correction almost over?

From his election victory on the 6^th of November 2024,

Uncertainty Soars

Investors are by their very nature risk takers, but they are always trying to reduce the risk which they have to take to a minimum. Donald Trump, with his threat of an international trade war and his on-again, off-again tariffs has significantly increased the level of risk in markets across the world. This can be seen in the extraordinary volatility in the S&P500

Liberation Day

Trump has done the unthinkable. He has deliberately engineered the collapse of the US and world stock markets in the nonsensical belief that somehow an international trade war will make Americans richer. Nothing could be further from the truth. His actions have taken the S&P down from its all-time record high of 6144.15 on 19^th February 2025 to Friday’s

The Creation of Money

The money supply of a country is a symbol of the goods and services of that country. Obviously, if the size of the money supply is increased more rapidly than the real growth of its economy, then you have more money chasing the same goods and services, resulting in rising prices. Since, over the long term, the only organisation that can create money is the government,

V-Bottom is likely

The 10% collapse of Wall Street, which is a direct result of Trump’s random policy of on-again, off-again tariffs, is very similar to what happened to Wall Street in February/March 2020 when investors tried desperately to accurately discount the impact of the COVID-19 pandemic.

Normally, corrections in the market

The Trump Correction

It is relatively unusual for the activities of American presidents or what they say to have an impact on the New York Stock Exchange, especially during their first 100 days in office. Trump, however, is the exception. His confused, on-again, off-again rulings on tariffs have rattled the market. Markets hate uncertainty and even Trump himself doesn’t appear to know exactly

Dividends

Investors know that the return on a share is made up of a capital gain plus the dividend. Private investors are mostly attracted to the prospect of making a capital gain on the shares which they buy and do not often consider the dividends. What they perhaps do not realise is that a capital gain is actually just the dividend in a different form.

Quarterlies

One of the major differences between the US equity markets and the JSE is that listed companies in America are required to report every 3 months, not every 6 months as they are on the JSE. The quarterly reports of the S&P500 companies are closely followed by investment analysts and predictions are made for their profits.

Gold's Record Run

On Friday last week, gold reached a new all-time record high of $2871.42 per ounce. Its gain in rands has been even more impressive rising from less than R1000 per ounce in August 1992 to last Friday’s close of R52864.85.

In our Confidential Report of March

Growth by Acquisition

Hudaco (HDC) is a master of growing by acquiring smaller businesses in similar fields of activity or businesses, which then complement its existing suite of businesses. It has been making these bolt-on acquisitions for many years and has developed great expertise at selecting and evaluating appropriate targets.

These bolt-on acquisitions are mostly small