Markets Face Turbulence as Politics, Policy, and Risk Collide

26th August 2025

Markets are on edge as politics and policy collide. President Trump moved to fire Fed Governor Lisa Cook over disputed mortgage allegations, a move Cook rejects and experts say could undermine the central bank’s independence. Trump also threatened tariffs on countries with digital taxes, putting new strain on already fragile U.S.-EU trade talks. Bitcoin slipped below $110K as traders weighed Fed turmoil and key economic data due later this week. In corporate news, Tesla was hit with a $243M verdict tied to a fatal Autopilot crash after rejecting a $60M settlement. Meanwhile, analysts warn retail investors are piling into risky ETFs at a pace reminiscent of past market peaks. All this and more in today’s Read It and Eat! 

Markets Face Turbulence as Politics, Policy, and Risk Collide

Markets are on edge as politics and policy collide. President Trump moved to fire Fed Governor Lisa Cook over disputed mortgage allegations, a move Cook rejects and experts say could undermine the central bank’s independence. Trump also threatened tariffs on countries with digital taxes, putting new strain on already fragile U.S.-EU trade talks. Bitcoin slipped below $110K as traders weighed Fed turmoil and key economic data due later this week. In corporate news, Tesla was hit with a $243M verdict tied to a fatal Autopilot crash after rejecting a $60M settlement. Meanwhile, analysts warn retail investors are piling into risky ETFs at a pace reminiscent of past market peaks. All this and more in today’s Read It and Eat! 

Major News

• Trump Moves to Fire Fed’s Lisa Cook Over Mortgage Allegations

President Donald Trump said Monday he was firing Federal Reserve Governor Lisa Cook over alleged improprieties in mortgage applications, a dramatic and unprecedented move that could test the limits of presidential authority over the central bank. Trump accused Cook, the first Black woman to serve on the Fed’s board, of misrepresenting two properties in Michigan and Georgia as primary residences in 2021 and said this amounted to “deceitful and criminal conduct.”

Cook, who was appointed by President Joe Biden in 2022 to a term lasting until 2038, quickly rejected the claims. Through her lawyer Abbe Lowell, she said Trump had “no authority” to remove her and vowed to continue her duties. Legal experts agree the situation is murky: while the Federal Reserve Act allows removal of a governor “for cause,” no president has ever tried to use that provision, and scholars argue Cook’s mortgage history was already vetted during her Senate confirmation.

The allegations originated with William Pulte, head of the Federal Housing Finance Agency and a Trump ally, who last week referred the matter to the Justice Department. But critics say the case appears politically motivated, coming alongside Trump’s broader push to pressure the Fed into cutting interest rates and install loyalists on its board. “The idea that past private financial activity can suddenly become grounds for dismissal is inconsistent with how the Fed has operated,” said Peter Conti-Brown, a Fed historian at the University of Pennsylvania.

Markets reacted immediately, with short-term Treasury yields falling and longer-term yields climbing a sign investors expect rate cuts but worry about the Fed’s independence. Analysts warn that undermining the central bank’s autonomy could weaken its inflation-fighting credibility. For now, Cook remains defiant: “I have no intention of being bullied to step down,” she said. The outcome could reshape not just the Fed’s leadership, but also confidence in one of the world’s most important financial institutions. Yahoo.Finance 

• Trump Threatens Tariffs Over Digital Taxes on U.S. Tech

President Donald Trump has warned he could slap tariffs and export restrictions on countries that impose digital taxes, arguing such measures unfairly target American tech giants. In a post on Truth Social, Trump said regulations like the EU’s Digital Markets Act (DMA) and Digital Services Act (DSA) “discriminate against U.S. technology” while giving “a complete pass” to China’s biggest firms. He added that “substantial” tariffs would follow if nations failed to “show respect” to American companies.

Although Trump didn’t name specific countries, his comments were widely seen as a jab at the EU and the U.K., which both have digital tax regimes. The EU’s DMA and DSA aim to curb monopolistic behavior by large platforms and reduce harmful content online, while several member states including France, Italy, and Spain already levy digital services taxes. The U.K. applies a 2% digital services tax, though it managed to secure a trade deal with Washington without dropping it. Canada, by contrast, scrapped its planned digital tax earlier this year in an effort to smooth trade talks with the U.S.

Trump’s remarks risk unsettling fragile progress in U.S.-EU trade relations. Just last week, the two sides announced fresh momentum on a trade pact designed to cut tariffs and ease barriers to transatlantic business. But Brussels has been firm that its digital regulations seen as a cornerstone of fair competition and online accountability are not up for negotiation. “We have made it very clear… the DMA and DSA were not on the table,” the European Commission said.

The threat also comes as tensions grow in the semiconductor sector, where U.S. firms like Nvidia and AMD are already navigating export restrictions. Earlier this year, the companies agreed to hand over 15% of revenue from China sales to the U.S. government in exchange for export licenses. Trump’s suggestion that further curbs may be on the way will add to uncertainty for chipmakers and global tech firms alike. Yahoo.Finance 

• Bitcoin Drops Below $110K as Fed Turmoil Adds to Market Jitters

Bitcoin slipped further on Monday, falling 2.8% to $109,882 as traders braced for a week of key economic data and heightened uncertainty around the Federal Reserve. More than $940 million in liquidations mostly from long positions hit the market over the past 24 hours, according to CoinGlass, underscoring just how fragile sentiment has become. “Capital is rotating out of risk, with thin weekend liquidity amplifying swings,” said Rachael Lucas, a crypto analyst at BTC Markets.

The decline pushed Bitcoin below $110,800, a level Glassnode identifies as the average cost basis for investors who bought in over the last three months. Falling under that threshold has historically signaled deeper corrections and periods of prolonged weakness. For traders, the drop is a red flag, with analysts warning that Bitcoin could face more pain if it fails to reclaim that level soon.

Broader market nerves were rattled by political drama in Washington. President Donald Trump announced the firing of Federal Reserve Governor Lisa Cook, accusing her of falsifying mortgage documents a claim Cook has denied. The move sparked immediate pushback from economists and investors, with the U.S. dollar index briefly dropping 1% before recovering. “Our economy is at risk when the President undermines the Fed,” economist Justin Wolfers warned on X, calling the decision “dangerous.”

Looking ahead, investors are turning their attention to Thursday’s revised U.S. GDP figures and Friday’s core PCE inflation data. Growth is expected to be nudged higher to 3.1%, while inflation is forecast to tick up to 2.9%. If growth cools or inflation surprises on the upside, markets worry it could derail expectations for a September rate cut and add more pressure to already volatile assets like Bitcoin. Financial Times

• Tesla Turned Down $60M Settlement Before $243M Autopilot Verdict

Tesla could be facing a much bigger bill than it bargained for. The company, led by Elon Musk, rejected a $60 million settlement offer in a lawsuit tied to a 2019 fatal crash involving a Model S equipped with Autopilot. That decision came back to haunt the automaker earlier this month when a Florida jury awarded $243 million in damages.

The case centered on an April 2019 crash where the driver’s Tesla struck a parked Chevrolet Tahoe as two people stood beside it. Naibel Benavides Leon was killed, and her boyfriend Dillon Angulo was seriously injured. Jurors awarded the victims’ estate and Angulo a combined $129 million in compensatory damages, plus another $200 million in punitive damages. Tesla was held responsible for 33% of the compensatory damages roughly $42.6 million and the full punitive award.

Lawyers for the plaintiffs revealed the rejected settlement in a recent court filing, where they also requested legal fees under Florida law. Tesla, which has denied wrongdoing, argued that the verdict undermines efforts to develop life-saving autonomous driving technology. The company has already said it plans to appeal.

This marks the first trial over the wrongful death of a third party involving Tesla’s Autopilot system. While the automaker has faced similar lawsuits in the past, they were either settled or dismissed before reaching a jury. The high-profile verdict now puts even more scrutiny on Tesla’s driver-assistance technology and the risks tied to its rollout. Yahoo.Finance 

• ETFs Outnumber Stocks for the First Time in U.S. Markets

Exchange-traded funds (ETFs) are booming in the United States, and for the first time, there are now more ETFs than individual stocks listed on the market. According to Bloomberg data via Morningstar, there are currently over 4,300 ETF products in the U.S., surpassing the roughly 4,200 stocks. Back in 2010, the landscape looked very different, with just 1,100 ETFs compared to more than 4,300 stocks. Fast forward 15 years, and ETFs have nearly quadrupled, while the number of listed stocks has declined.

The pace of growth has been especially striking this year, with more than 640 ETFs launched an average of four new products hitting the market every trading day. These range from actively managed funds and money market products to ETFs focused on overseas equities and even virtual assets. Proponents argue that ETFs have become a symbol of “investment democratization,” making it easier for everyday investors to gain exposure to a wide variety of assets.

Still, not everyone is cheering. Some experts worry the explosion of funds is leading to oversaturation, with highly niche products popping up in nearly every corner of the market. “There are ETFs for everything from artificial intelligence and pets to cannabis and even ‘woke’ or anti-work portfolios,” noted Douglas Bonfas, founder of Bonfidewells. For skeptics, the sheer number of choices raises the risk that many of these funds won’t stand the test of time.

Interestingly, Korea is seeing a similar trend. ETFs there recently outnumbered stocks listed on the KOSPI as of April, though they still make up less than half the total when including KOSDAQ and KONEX. The rapid expansion shows just how central ETFs have become to global investing, but also highlights the growing debate over whether more is always better. Bloomberg 

Minor News 

• Wealthy UAE buyers eye prime London real estate. Financial Times

• Morgan Stanley Predicts September Fed Cut as Powell Signals Softer Stance. Yahoo.Finance 

• US stocks ease after Friday’s rally as investors await Nvidia earnings for AI and tech signals. Reuters

• Silicon Valley forms pro-AI PACs to defend the industry ahead of midterms. Wall Street Journal 

• Musk’s xAI Sues Apple, OpenAI Over AI Competition and App Store Rankings. Reuters 

• LinkedIn Expands Video Ad Push, Partners With More Creators and Publishers. Bloomberg 

• Fox Channels at Risk of Going Dark on YouTube TV Amid Payment Standoff. Bloomberg 

• Job market enters ‘no-hire, no-fire’ phase, signaling employer caution. CNBC