The global financial narrative may be transitioning from trade tariffs to concerns surrounding central bank credibility, according to Tony Brennan, chief investment strategist at Canaccord Genuity Australia. Brennan suggests the primary threat to US markets may now stem from increasing pressure on the Federal Reserve. While worries about US trade policy have subsided somewhat, the intensifying pressure from the White House for lower interest rates is a growing concern for investors.
Brennan highlights the US president’s persistent advocacy for lower interest rates and criticism of the Fed chair. He cautions that any aggressive measures by the administration to undermine the chair and the Fed’s independence could destabilise US markets broadly. Canaccord Genuity Australia is a full-service financial firm, providing wealth management and investment banking services. The company serves corporate, institutional and private clients in Australia and internationally.
Brennan notes that the president’s recent call for a substantial three-percentage-point rate cut, potentially to around 1 per cent or lower, seems geared toward financing growing budget deficits and managing national debt. This approach, increasingly termed “fiscal dominance” by economists, could blur the separation between monetary and fiscal policy. This raises the risk of increased inflation, potentially unsettling investors.
Given these concerns, Brennan advises investors to exercise caution. Canaccord’s current tactical positioning involves a moderately underweight stance on equities and an overweight position in cash, with a continued focus on international diversification to mitigate risk.
