Powell on thin ice?

06/26/25 Prospero.ai Investing (232nd) Edition (Midweek)

Markets Jump as Powell’s Future Casts Doubt — and Dovish Hope

Markets are rallying as traders bet on the possibility of a more dovish Fed in the months ahead — driven largely by reports that Jerome Powell will soon be replaced by Donald Trump. The thinking? His replacement would likely favor a faster path to rate cuts, aligning with Trump’s public calls for looser monetary policy.

That optimism is helping push markets higher, even in the face of underwhelming recent economic data:

• Q1 GDP -0.5% revised down from -0.2% expectation

• May CPI came in at 0.1% vs forecasts of 0.3%

Despite these disappointments, the market is shaking them off and focusing instead on what could come next from the Fed. If Powell is replaced, the door opens wider for earlier or more aggressive cuts — a narrative the market appears eager to embrace.

We’ll be watching closely at the open. If this momentum holds, we’ll look to add long exposure to high-growth, higher-beta names and lean into the trend.

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