Flash update – ‘Fed Independence in Question’ – August 2025
Analysis by: Amber Gleeson, Investment Specialist, Aviva Investors
The independence of the Federal Reserve is under renewed scrutiny following a series of actions by President Trump, the latest being the attempted firing of Fed Governor, Lisa Cook.
What are the key headlines?
- President Trump announced on Monday night that he was firing Fed governor Lisa Cook “effective immediately”, citing allegations of mortgage fraud.
- Cook’s removal would allow the US president to select a replacement that would potentially be open to more frequent interest rate cuts.
- This would be his second opportunity in two weeks to gain further sway within the Federal Reserve after he nominated Stephen Miran to fill Adriana Kugler’s seat, when she announced plans to leave the Fed.
- Investors have grown increasingly uneasy in recent months about President Trump’s criticism of Fed chair Jay Powell, his temporary appointment of Stephen Miran and other moves such as firing the Bureau of Labour Statistics chief. These moves are undermining investors’ confidence in the Fed’s independence and the integrity of US economic data.
How have markets reacted?
- Yields of longer-dated US government debt increased, while yields on shorter dated US government debt fell. The difference between long-term and short-term yields is close to its widest in three years.
- The US dollar weakened by 0.2% on Tuesday against a basket of global currencies, including the euro and pound.
- Why? Investors expect political pressure on the Fed to push interest rates down in the short term, while concerns over government spending are driving long-term rates higher and weakening the dollar.
How are we positioned in Multi-asset ESG Active?
- We have a preference for 5-year over 30-year U.S. Government bonds. Shorter-dated bonds may benefit from potential near-term rate cuts, while fiscal concerns pose greater risks to longer-dated bonds.
- We remain underweight the US Dollar due to longer-term fiscal concerns.
Market Volatility Supports
Lessons on the Benefits of Long Term Investing - download Lessons on the Benefits of Long Term Investing
(0 KB)
| Warning: Past performance is not a reliable guide to future performance. Warning: The value of your investment may go down as well as up. Warning: These funds may be affected by changes in currency exchange rates. Warning: If you invest in this product you will not have access to your money until you retire. |
Key risks
- Investment risk & currency risk
The value of an investment and any income from it can go down as well as up and can fluctuate in response to changes in currency and exchange rates. Investors may not get back the original amount invested. - Emerging market risk
Investments can be made in emerging markets. These markets may be volatile and carry higher risk than developed markets. - Derivatives risk
Investments can be made in derivatives, which can be complex and highly volatile. Derivatives may not perform as expected, meaning significant losses may be incurred.
Any companies or markets mentioned are for illustrative purposes only and not intended to be investment recommendations. For more information on the benefits and risks of investing please see our Your Investment Guide brochure.
THIS IS A MARKETING COMMUNICATION
Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (Aviva Investors) or Longboat Analytics as at 27 August 2025. Unless stated otherwise any opinions expressed are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. The value of an investment and any income from it can go down as well as up. Investors may not get back the original amount invested.
Issued by Aviva Investors Global Services Limited, delegate of Aviva Investors Luxembourg for the ongoing management of the fund. Aviva Investors Luxembourg is the investment manager appointed by Aviva Life & Pensions Ireland DAC to manage the fund. Authorised and regulated in Luxembourg by the Commission de Surveillance du Secteur Financier.
Aviva Investors Global Services Limited, registered in England No. 1151805. Registered Office: 80 Fenchurch Street, London, EC3M 4AE, United Kingdom. Authorised and regulated by the Financial Conduct Authority and member of the Investment Management Association. Contact us at Aviva Investors Global Services Limited, 80 Fenchurch Street, London, EC3M 4AE, United Kingdom.