Trump Eyes Early Replacement for Powell? ETF Strategies to Play

According to a report by The Wall Street Journal on Wednesday evening, President Trump is growing frustrated with Federal Reserve Chair Jerome Powell’s cautious stance on interest rates, as quoted on Yahoo Finance.

As a result, Trump is considering announcing Powell’s successor as early as September or October — much earlier than the typical three to four-month transition period. Powell’s current term doesn’t expire until May 2026.

Earlier on Wednesday, Trump confirmed he’s actively weighing options for a replacement, stating, “I know within three or four people who I’m going to pick.”

Powell Defends Fed’s “Wait and See” Strategy

Chair Powell concluded two days of congressional testimony this week, emphasizing the Fed's stance on rate pause and observe how the president’s new tariffs are influencing economic data before making decisions on further rate cuts. He reassured lawmakers that the central bank is “well-positioned” to wait for more clarity.

Trump Criticizes Powell Amid Rate Cut Speculation

Trump called Powell “terrible” for not aggressively cutting interest rates. Meanwhile, Powell told the Senate that caution is necessary, citing inflation risks stemming from the administration’s trade policies.

At the current level, the probability of a rate cut at the Fed’s July meeting has increased to 25%, up from just 12% a week ago. Markets are now pricing in a total of 64 basis points in cuts by year-end — up from 46 basis points forecasted last Friday.

ETF Strategies to Follow if Trump Picks Powell’s Replacement Soon

Bet on Broader Market Stocks

If investors receive a rate cut soon, their optimism will likely increase. During periods of rate cuts, most market capitalizations tend to benefit, which could boost broader U.S. market ETFs such as the SPDR Portfolio S&P 1500 Composite Stock Market ETF SPTM.

Dollar Slumps to Lowest Level in Over Three Years

The U.S. dollar weakened sharply against the euro, falling to levels not seen since late 2021, as quoted on Yahoo Finance. Persistent concerns about the economic fallout from Trump’s tariffs and growing skepticism over the Fed’s independence have contributed to the dollar’s downward slide. If Powell Replacement takes the charge soon and starts cutting rates, the dollar might lose more strength. In that case, Invesco DB US Dollar Index Bearish ETF UDN could be a good bet.

High-Growth ETFs Likely to Gain

Low rates are generally favorable for growth stocks as they reduce the cost of borrowing, often needed to finance the expansion of companies. Lower cost of capital increases the present value of future earnings, and shifts investor preferences toward higher-risk, higher-return investments.

This combination makes growth stocks, with their potential for substantial future profit, particularly attractive when rates are low. Thus, these stocks often outperform other asset classes, such as value stocks, during such periods. Invesco QQQ QQQ could prove to be a winning bet in this regard.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research