Markets opened the week on edge as investors rushed to de-risk amid fresh fears Donald Trump may actually try to fire Federal Reserve Chair Jerome Powell. The former president doubled down on Truth Social, calling for preemptive rate cuts, while his team admitted it's actively reviewing Powell's future. That was enough to spark a broad selloff in US assets even if firing a Fed Chair isn't exactly straightforward. But perception matters. And right now, global investors are seeing cracks in the foundation of Fed independence and running.

The dollar dropped to its lowest level since late 2023, with the Bloomberg Dollar Spot Index down as much as 1% intraday. Hedge funds accelerated the exit, holding their least bullish positions since October, while currencies like the euro and yen punched through key levels. Meanwhile, bond markets flashed recession signals: short-term yields fell sharply as traders piled into two-year notes, while long bonds sold off steepening the curve in a rare nine-week streak. Equities sank more than 2%, with firms like Citigroup, BlackRock, and Bank of America turning bearish on US stocks. Their message? The US exceptionalism trade is fading fast.

Tesla (NASDAQ:TSLA) and other high-beta names may feel the heat if rate cut expectations slip or volatility spikes. While markets still price in multiple Fed cuts this year, former NY Fed president Bill Dudley warned the Fed may move slower than expected. And if Powell is weakened or sidelined politically, that could mean fewer tools and more confusion when recession risks hit hard. Bottom line: if investors start to believe the Fed can't act independently, it won't just shake the dollar. It'll shake the entire bull case for US assets.