Trump has been vocal about wanting lower interest rates, which typically weakens the dollar by making US assets less attractive to global investors. “I’m wondering if his real goal is to pound the dollar. Because every day that he beats up on Powell, the dollar goes down,” he said, adding that “Even if Powell is replaced, it doesn’t necessarily mean the Fed is going to give the President what he wants.”
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His advice to the President: focus on the campaign trail, not the Fed. “You don’t need lower interest rates. The economy is doing just fine,” Yardeni said. “Save lower interest rates for when you really need them.”
Yardeni believes that overall investor sentiment has improved. He attributed this to the resilience of the US economy, saying it withstood “a dramatic increase in the federal funds rate” without tipping into recession.
Strong quarter one earnings have helped and expectations for the second quarter are modest enough.
While bank earnings looked solid, muted stock reaction was likely because “the bank stocks have already discounted a lot of the good news.” He expects year-over-year (YoY) earnings growth to be closer to 7%, compared to the 3.5–4.5% currently expected.
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For the full interview, watch the accompanying video
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