{"id":26992,"date":"2025-08-27T17:57:09","date_gmt":"2025-08-27T17:57:09","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/26992\/"},"modified":"2025-08-27T17:57:09","modified_gmt":"2025-08-27T17:57:09","slug":"the-markets-reaction-to-trump-hides-a-darker-truth-that-puts-the-american-economy-at-risk-piper-sandler-warns","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/26992\/","title":{"rendered":"The markets\u2019 reaction to Trump hides a darker truth that puts the American economy at risk, Piper Sandler warns"},"content":{"rendered":"

\u201cAmerican exceptionalism\u201d has meant different things at different points in time. At heart, the belief that there\u2019s something distinct and unique about America goes back hundreds of years, arguably to the Puritans of the Massachusetts colony who believed their \u201ccity upon a hill<\/a>\u201d was a kind of model society for the world. This concept was revived throughout the years, notably by President Ronald Reagan in the 1980s as he, along with Margaret Thatcher, advanced a distinctive version of \u201cfree market capitalism<\/a>.\u201d The remarkable performance of U.S. stock markets coming out of the pandemic has been a striking example where America really has been exceptional<\/a>, far outperforming the rest of the world in the 2020s.<\/p>\n

Both of these are under threat as a result of President Trump\u2019s escalating efforts to bring the Federal Reserve under his direct control, according to a new warning from investment bank Piper Sandler<\/a>. \u201cThe U.S. is moving away from free markets, limited government, and the rule of law at an astonishing pace,\u201d the bank writes, taking aim at a range of actors beyond the president to indict a complacent Congress and even markets themselves. \u201cWe are watching the pillars of the long bull market being removed one by one,\u201d the bank warns, adding that the crisis goes far beyond Trump\u2019s unprecedented attempt to fire a Fed governor.<\/p>\n

Although it did not say so explicitly, the bank took aim at American markets\u2019 string of all-time highs<\/a>, essentially warning that they will not ride to the rescue. \u201cWe do not share the investor conceit that the markets regularly \u2018discipline\u2019 politicians,\u201d the bank notes, warning that \u201cbond vigilantes\u201d will not save America from the developing problem. It also argues that the crisis for the American economy goes far beyond the attempted firing of one Fed member, or central bank independence.<\/p>\n

Uncharted waters<\/p>\n

To start with the Fed, Piper Sandler notes that Trump has made explicit that he believes monetary policy should be his to shape, dismissing the principle of an independent Fed led by nonpartisan economists. His late-night attempt to fire Federal Reserve governor Lisa Cook\u2014citing obscure allegations of mortgage fraud\u2014has now forced the courts into uncharted territory, testing whether a president can legally purge central bank officials who resist him.<\/p>\n

Piper Sandler notes that the president can only fire a member of the board for cause, and the mortgage fraud accusations against Cook may or may not rise to this level. The Supreme Court wrote in an opinion issued in May that the Fed is different in nature from other independent agencies, the bank said. At this point, it\u2019s unclear whether Trump can in fact fire Cook or whether she will remain in her role while her fate is decided. Still, Piper concludes that \u201cthe judiciary is no match for Trump\u2019s broader assault on the Fed. If the president is determined to politicize the Fed and Congress won\u2019t stand in the way, then it is going to happen.\u201d<\/p>\n

While these are uncharted waters for America, they are not for countries under authoritarian regimes, even ones previously devoted to free markets and democracy. Piper Sandler does not draw any comparisons, but the recent example of Turkey is salient, where President Recep Tayyip Erdogan<\/a> has pursued low interest rates<\/a> against rising inflation, fired central bankers<\/a> who disagreed, and appointed himself the head of a sovereign wealth fund<\/a>.<\/p>\n

Markets\u2019 repeated failures<\/p>\n

Piper Sandler then took indirect aim at all the financial experts who argue that for all of the Trump theater, markets\u2019 outsize returns<\/a> show that business as usual is still taking place. Consider Nouriel Roubini, the often gloomy prognosticator sometimes known as Dr. Doom<\/a>, who has been uncharacteristically optimistic in recent years. For instance, he tweeted in April<\/a> that the tech sector is dynamic enough to overcome these issues: \u201cTech trumps tariffs even if Mickey Mouse or a clown were to run the U.S.! It doesn\u2019t matter, and American exceptionalism will remain and be resilient regardless of Trump given the hyper-dynamism and innovations of the U.S. private sector.\u201d<\/p>\n

Earlier today, Jay Hatfield of Infrastructure Capital Advisors told Fortune\u2019s Eva Roytburg<\/a>: \u201cThis is very positive.\u201d He added that he was in favor of Trump\u2019s moves on the Fed: \u201cThe simple way to say it is that eliminating Fed incompetence is far more important than defending alleged Fed independence. The Fed has always been political; it\u2019s only Trump who talks about it in public.\u201d<\/p>\n

Piper Sandler allows for the fact that an \u201cexcessively loose Fed and spendthrift Congress\u201d created the inflation wave of 2022<\/a>, but then lectures markets and investors for failing to exercise any sort of discipline. Certainly, it says, markets have been unable to reverse the ever-growing $37 trillion national debt and the \u201chighest peacetime non-recessionary deficits in its history,\u201d with the U.S. on track to surpass its record debt-to-GDP ratio.<\/p>\n

Markets have not acted as a restraint on Trump in terms of trade<\/a>, Piper Sandler argues, noting that \u201cmore than 70% of what Trump promised on Liberation Day has come to fruition.\u201d Furthermore, it notes that Trump is doubling down, threatening just last night to impose tariffs in response to digital services taxes.<\/p>\n

Markets\u2019 recent rally at the prospect of rate cuts is nothing to be celebrated, Piper Sandler says, as these cuts have come from political pressure. Piper then recalls how markets were remarkably inefficient and unhelpful during capitalism\u2019s greatest test since the Great Depression. \u201cIt didn\u2019t see the housing bust and Great Financial Crisis coming. We find little evidence the market is forward-looking or disciplines policymakers.\u201d<\/p>\n

Congress\u2019s role<\/p>\n

Meanwhile, Congress shows little inclination to resist. Few of Trump\u2019s Fed nominees have been rejected by the Senate, despite mounting concerns over their independence. Republicans, wary of crossing Trump, have largely waved through even controversial picks. Stephen Miran is expected to be confirmed as soon as next month\u2014and should Powell step aside when his term as chair expires, Trump will almost certainly get his preferred replacement. It would take only four Republican defections to block any nominee, but Piper Sandler noted, \u201cWe\u2019ve seen no appetite to do so.\u201d<\/p>\n

Perhaps most rattling for Wall Street, Piper Sandler positioned Trump\u2019s Fed fight as merely one piece of a broader dismantling of the economic framework underpinning the long expansion of recent decades. The bank argues that \u201cdecades of freer trade [have] been dramatically reversed overnight.\u201d It sees \u201cthe sound money pillar\u201d as being fundamentally compromised by Trump\u2019s assault on the Fed, among other things. Then it lists a litany of stunning and unprecedented developments.<\/p>\n

\n

In the summer of 2025, it notes, we have witnessed the Republican Party, long thought to favor limited government, making unprecedented intrusions into the way business is done, including Trump\u2019s negotiation of a government stake in Intel<\/a>. Consider, the bank adds, the \u201covert effort to politicize the Fed, to politicize the data, an effort to jump-start a sovereign wealth fund, the federal government taking big stakes in private sector companies, 15% export taxes on companies, FBI raids on critics\u2014all at the whim of one man with no legislation or meaningful criticism from Congress.\u201d Piper Sandler poses an implicit question: Just how exceptional will America remain?\n<\/p>\n<\/blockquote>\n

Introducing the 2025 Fortune Global 500<\/strong>, the definitive ranking of the biggest companies in the world. Explore this year’s list.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"\u201cAmerican exceptionalism\u201d has meant different things at different points in time. At heart, the belief that there\u2019s something…\n","protected":false},"author":2,"featured_media":26993,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[175],"tags":[79,356,18,182,19,5389,17,188],"class_list":{"0":"post-26992","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets","8":"tag-business","9":"tag-donald-trump","10":"tag-eire","11":"tag-federal-reserve","12":"tag-ie","13":"tag-interest-rates","14":"tag-ireland","15":"tag-markets"},"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/26992","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=26992"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/26992\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/26993"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=26992"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=26992"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=26992"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}