The 'sell America' trade is roaring in markets as Trump butts heads with the Fed

• Stocks, bonds, and the dollar dropped sharply on Monday.
• Recent comments from the White House have investors worried about Fed independence.
• US safe-haven trades have suffered as trade policy rattles investor confidence.

The "sell America" trade was in full swing as investors kicked off the week on Monday.

US indexes dropped, the US dollar tumbled to a three-year low, and Treasury yields rose. While tariff and trade war fears have been the culprit behind the ailing US exceptionalism trade for much of 2025, Donald Trump's public criticism and insistence that he wants to fire Fed chief Jerome Powell is the latest development rattling investor confidence.

On Friday, National Economic Council Director Kevin Hassett commented that Trump will "study" ways to remove the Fed chair. The president has long lambasted Powell for not reducing interest rates. Trump's frustration gained steam since Powell's latest speech, in which he suggested that the president's tariffs could create policy issues for the central bank.

Trump fired off another salvo of criticism aimed at the Fed chair on Monday. In a post on Truth Social, the president called Powell a "major loser" who has been too late in taking action on interest rates.

But White House interference in the Fed's leadership would not sit well with investors, and attempts to politicize monetary policy decisions would likely introduce further uncertainty into markets.

"No matter which way this shakes out, not only is the independence of the Fed clearly under threat, but the prospect of de-dollarisation and a move away from US hegemony is an increasingly realistic one," Michael Brown, senior research strategist at Pepperstone, said on Monday. "Right now, I will stress, there is no alternative to the greenback as the global reserve currency. However, given how the Trump Admin are fostering an increasing degree of distrust among investors, and operating in an incoherent manner, it may not take much for that view to shift."

Combined with ongoing tariff uncertainty, Trump's public criticism of Powell helped the "sell America" trade gain steam on Monday.

Stocks

Indexes dropped sharply Monday morning, sending the Dow Jones Industrial Average plunging over 1,000 points. The S&P 500 and Nasdaq Composite sank almost 3%.

Here's where major indexes stood shortly around 11:30 a.m. ET on Monday:

• S&P 500: 5,146.71, down 2.57%
• Dow Jones Industrial Average: 38,140.17, down 2.61% (-1,023.33 points)
• Nasdaq Composite: 15,797.71, down 3%

Major stock indexes have swung violently over the past few weeks in reaction to Trump's sweeping tariffs unveiled in early April. Though most of the trade duties were later paused, tariffs on China have soared even higher, and the resulting trade war has been a challenge for investors to digest.

No new trade deals were announced over the weekend to uplift that market's spirits; instead, China warned that it would take countermeasures against any nation that reaches a deal with the US to isolate the country from global trade.

Bonds

A US Treasury sell-off gained traction, with the benchmark 10-year yield rising five basis points Monday morning to 4.37%.

Bond prices, which move in the opposite direction to yields, have dropped in recent weeks amid threats to US growth and deep uncertainty around trade. Commentators have observed that instability in the US economic outlook has hurt Treasurys' ultr-safe reputation.

It's a dynamic that's played out several times already this year, with tariff uncertainty and policy headwinds sending yields surging.

Bond vigilantes may have forced Trump to hit pause on the trade war earlier in the month, but headwinds for US Treasurys also include foreign investors selling and volatility in the so-called basis trade put on by hedge funds.

Trump's attacks against Powell will likely only heighten investors' nervousness, keeping yields elevated.

Dollar

The greenback has continued to plunge, sending the US Dollar Index deeper to a three-year low.

The index, which measures the dollar against a basked of rival currencies, was down about 1% to 98.08 at 10:30 a.m. ET.

"President Trump's renewed criticism of Fed Chair Powell this week is a reminder that trade policy is not the only channel through which the administration's unconventional approach could undermine the dollar and US asset markets," Capital Economics wrote.

The dollar's move lower goes against earlier expectations, as it was implied that tariffs would support currency levels.

"The gap between actual exchange rates and what short-term interest rate differentials point to has widened a bit further, suggesting that perceptions around the dollar's safe-haven status are not improving," Capital Economics wrote on Friday, adding that the downtrend will prove long-lasting.

Market commentators have broadly praised Powell for navigating numerous crises throughout his tenure as Fed chief. Those include the pandemic and multi-decade high inflation that came after.

"Let's recognise that, in the last 7 years, Powell has dealt with a huge funding squeeze, the pandemic, 4-decade high inflation, regional banks crumbling, a 'soft landing', and now a global trade war. Barring the QT 'autopilot' misstep right at the start of his term, I'd argue he's done a damn good job," Pepperstone's Brown said.