The reaction of the markets to Trump hides a darker truth that puts the American economy in danger, warns Piper Sandler

The two are threatened due to the climbing of President Trump’s efforts to put the federal reserve under his direct control, according to a new warning from the investment bank Piper Sandler. “The United States is moving away from the free markets, the limited government and the rule of law at an astonishing rate,” writes the bank, aimed at a range of actors beyond the president to instill a complacent congress and even the markets themselves. “We look at the pillars of the long bull market removed one by one,” warns the bank, adding that the crisis goes far beyond Trump’s unprecedented attempt to dismiss a Fed governor.

Although he did not say so explicitly, the bank targeted the top of all times in the American markets, essentially warning that they will not go to the rescue. “We do not share the vanity of investors that the markets” regularly discipline “politicians,” notes the bank, warning that “bond vigilants” will not save America from the developing problem. He also argues that the American economy crisis goes far beyond the attempted dismissal of a member of the Fed or the independence of the Central Bank.

Unexplored waters

To start with the Fed, Piper Sandler notes that Trump has explained that he thought that monetary policy should be his to shape, rejecting the principle of an independent Fed led by non -partisan economists. His attempt at the end of the evening to dismiss the governor of the federal reserve, Lisa Cook, which obtained obscure allegations of mortgage fraud – has now forced the courts in an unexplored territory, testing if a president can legally purge those responsible for the central bank who resist him.

Piper Sandler notes that the president cannot dismiss a member of the board of directors, and that the accusations of mortgage fraud against Cook can reach this level or not. The Supreme Court wrote in an opinion issued in May that the Fed is of a different nature from other independent agencies, said the bank. At this point, it is not clear if Trump can actually draw Cook or if it will remain in its role while its fate is decided. However, Piper concludes that “the judiciary is not up to the broader assault of Trump against the Fed. If the president is determined to politicize the Fed and the Congress does not maintain, then it will happen. ”

Although they are unexplored waters for America, they are not intended for countries under authoritarian regimes, even those previously devoted to free markets and democracy. Piper Sandler makes no comparison, but the recent example of Turkey is a salient, where President Recep Tayyip Erdogan continued low interest rates against the increase in inflation, dismissed the central bankers who did not agree and were named at the head of a sovereign fund.

Repeated market failures

Piper Sandler then took the indirect goal of all financial experts who argue that for all Trump Theater, dedicated market yields show that business as usual always take place. Consider Nouriel Roubini, the often dark prognosis sometimes known as Dr Doom, who has been unusually optimistic in recent years. For example, he tweeted in April that the technological sector is dynamic enough to overcome these problems: “Technology prevails over prices even if Mickey Mouse or a clown should manage the United States!” This does not matter, and American exceptionalism will remain and will be resilient, regardless of Trump, given the hyper-damism and innovations in the American private sector. ”

Earlier in the day, Jay Hatfield of infrastructure capital advisers said Fortune‘S Eva Roytburg: “It’s very positive.” He added that he was in favor of Trump’s measures on the Fed: “The simple way to say that the elimination of the incompetence of the Fed is much more important than to defend the alleged independence of the Fed. The Fed has always been political; It is only Trump who talks about it in public. ”

Piper Sandler allows a “Fed Congress and excessively cowardly expenses” created the 2022 inflation wave, but then gives markets and investors for not having exercised a kind of discipline. Admittedly, he says, the markets could not reverse the national debt of 37 billions of constantly increasing dollars and the “non-recessive deficits in the highest peacetime in its history”, the United States on the right track to exceed its record debt ratio.

The markets did not act as a restraint on Trump in terms of trade, maintains Piper Sandler, noting that “more than 70% of what Trump promised the day of the Liberation materialized”. In addition, he notes that Trump Double, threatening last night to impose prices in response to digital services taxes.

The recent rally of markets to the prospect of rate reductions is not to be celebrated, says Piper Sandler, because these cuts come from political pressure. Piper then remembers how the markets were remarkably ineffective and useless during the greatest test of capitalism since the Great Depression. “It has not seen the bust of housing and the great financial crisis to come. We find little evidence that the market is turned forward or disciplines political decision -makers. ”

The role of Congress

Meanwhile, the congress shows little inclination to resist. Few candidates from Trump’s Fed have been rejected by the Senate, despite increasing concerns concerning their independence. The Republicans, suspicious of crossing Trump, worked largely by even controversial choices. Stephen Miran should be confirmed next month – and should withdraw when his mandate expires, Trump will almost certainly obtain his favorite replacement. It would only take four republican defections to block any candidate, but Piper Sandler noted: “We have not seen any appetite to do it.”

Perhaps most of the clicking for Wall Street, Piper Sandler has positioned Trump’s Fed’s fight as a simple broader element of dismantling of the economic framework that underpins the long expansion of the last decades. The bank maintains that “freer decades of trade (have) been considerably reversed overnight”. He considers “the pillar of money” as being fundamentally compromised by Trump’s assault against the Fed, among others. Then he lists a litany of breathtaking and unprecedented developments.

During the summer of 2025, he noted, we witnessed the Republican Party, long thought of promoting the limited government, making unprecedented intrusions in the way business is done, including Trump negotiations on government participation in Intel. Consider that the Bank adds: “The manifest effort to politicize the Fed, to politicize data, an effort to revive a sovereign fund of fortune, the federal government taking major issues in private sector companies, 15% export of taxes on businesses, FBI raids on criticism. Piper Sandler poses an implicit question: how exceptional America will remain?