Bessent’s Silent Influence: How the Treasury’s Moves Could Shape Powell’s Fate—and Markets

The simmering tension between President Trump and Federal Reserve Chair Jerome Powell has taken a new turn with Treasury Secretary Scott Bessent emerging as an unlikely stabilizing force. While Bessent has not publicly taken a stance on whether Trump could—or should—fire Powell, his actions and statements have quietly calmed markets and indirectly reinforced the Fed’s independence. This behind-the-scenes dynamic offers critical clues for investors navigating the intersection of politics and monetary policy in 2025.

Bessent’s Private Advocacy: The “Sole Grown-Up” in the Room

According to White House insiders, Bessent has been the administration’s de facto voice of reason on Powell’s future. During private meetings, he has repeatedly warned Trump that firing Powell would trigger catastrophic market fallout. Bessent’s warnings align with legal advisors who note that removing a Fed chair requires “cause” (e.g., misconduct), which Trump’s team lacks. The Treasury Secretary’s arguments have also centered on practicality: markets would likely panic, reversing gains made after years of Fed-driven stability.

This private advocacy has already had tangible effects. When Trump’s social media threats against Powell caused the S&P 500 to drop 2.4% in late 2024, Bessent’s subsequent remarks about trade de-escalation with China reversed the trend. By mid-2025, the S&P 500 had rebounded to a 2.51% surge following Bessent’s signals of moderation.

Public Statements and the Trade War Connection

While Bessent has avoided directly addressing Powell’s job security, his public focus on cooling U.S.-China trade tensions has indirectly supported the Fed’s position. During a JPMorgan investor summit, he stated, “there will be a de-escalation” of trade hostilities, a comment that sent Asian markets soaring—Hong Kong’s Hang Seng Index jumped 2.5%, and Japan’s Nikkei 225 rose nearly 2%.

The logic here is clear: If trade tensions ease, the pressure on Trump to force the Fed into rate cuts (to offset tariff-driven inflation) diminishes. Bessent’s push for a “slog” toward negotiated trade terms removes an immediate catalyst for Trump’s impatience with Powell’s rate-hike stance.

Legal and Political Constraints: Why Firing Powell Is a Long Shot

Even if Trump wanted to fire Powell, the path is fraught with obstacles. Fed chairs can only be removed for cause, and there is no evidence of misconduct. Legal experts estimate that a firing would trigger a prolonged court battle, with the Fed’s independence enshrined in law since the 1970s.

Moreover, the administration’s own economic team has privately conceded that Powell’s term expires in 2026—a deadline that gives Trump time to assess economic conditions before making a high-stakes decision.

Investment Implications: Bessent’s Signal, Not Powell’s Fate, Is the Key

For investors, the critical takeaway is this: Bessent’s public messaging on trade and economic stability matters far more than Trump’s tweets about Powell.

• U.S. Equities: Markets have shown a clear preference for Bessent’s moderation. The Nasdaq’s 2.71% rally after his JPMorgan comments underscores investor reliance on his voice of reason.
• China Exposure: Sectors tied to U.S.-China trade, like semiconductors and industrials, could see volatility tied to Bessent’s trade negotiations.
• Interest Rates: With Bessent indirectly supporting Powell’s tenure, the Fed’s current rate-hike trajectory remains intact.

Conclusion: Bessent’s Quiet Hand Holds the Cards

While headlines fixate on Trump’s fiery rhetoric, the real story lies in Bessent’s ability to temper the administration’s volatility. His behind-the-scenes advocacy, coupled with public signals of de-escalation, have already stabilized markets. Investors would be wise to monitor his statements closely: his influence on trade and fiscal policy—not just Powell’s job security—is the true driver of 2025’s economic trajectory.

The data speaks clearly: When Bessent reassures markets, stocks rally; when Trump threatens Powell, they waver. In an era of political unpredictability, Bessent’s steady hand—and the 2.5%+ gains his moderation has spurred—are the safest bets.