Global investors are poised for more turmoil in 2019 after the White House stepped up its criticism of America's top central banker.
Over the weekend, a flood of reports said Donald Trump had discussed the possibility of firing Federal Reserve chairman Jerome Powell. This unprecedented move would trigger even more instability in markets, which have already had their worst year since the 2008 crisis.
US officials strove to deny that Trump had suggested the deposition of Powell, who was appointed by the president only a year ago.
Treasury Secretary Steven Mnuchin tweeted that he had spoken with the president, who insisted he "never suggested firing" Powell, and did not believe he had the right to do so.
However, Trump also said – via Mnuchin – that he "totally disagrees" with the Fed's "absolutely dire" policy of raising interest rates and undoing its bond-buying program, further pressing the independent central bank.
Trump's attacks on the Fed intensified as stock markets fell sharply in the fall. Having taken credit for rising stock prices in 2017, the president was affected by the recent liquidation of Wall Street, which eliminated more than 15% of the value of the largest US companies.
Bloomberg said that Trump's frustrations with Powell have "intensified" since the Fed ignored its claims, raising lending costs last week, and said two more increases are likely in 2019.
However, it is unclear whether Trump could fire Powell if he wanted to – as Mnuchin's tweet points out. A Fed governor can only be fired for "cause" – as misconduct – rather than simply raising interest rates faster than the White House would like.
Stock markets tumbled after the Fed's decision last week as many investors abandoned stocks and amassed safe-haven assets such as US government debt.
John Hardy, Saxo Bank's head of foreign exchange strategy, said: "The market seems to be telling us that the Fed is making a political mistake that it will regret as it will be forced to reverse."
Wall Street suffered its worst December since 1931. The Dow Jones industrial average plunged 12 percent since the beginning of the month, amid growing concern that the world economy is slowing.
The leak means that about $ 7 trillion has been eliminated from world stocks this year. The MSCI index of all countries in the world, a broad measure of stocks worldwide, had its first double-digit loss in any year since the 2008 crisis.
Deutsche Bank calculated that 93% of assets produced a total negative return this year, the worst performance ever recorded.
The bank's top international economist, Torsten Slok, has compiled a list of 30 potential threats to the market in 2019. This includes the risk that the US economy will cope with a slowdown in China and Europe, the Brexit disorder and a deeper trade war.
Last week, the UK's FTSE 100 fell to its lowest level in 28 months. US stocks ended the week in a 14-month low, when the US government shutdown alarmed Wall Street.
Lukman Otunuga, a research analyst at FXTM, said the escalation between Trump and Congress over funding a wall on the Mexican border has created a pain in the markets.
"It was an unusually terrible trading week for financial markets, amid concerns about rising US interest rates, slowing global growth, Brexit uncertainty and chaos in Washington. With geopolitical risk factors weighing heavily on investor confidence, financial markets remain at risk of ending 2018 on a risky note, "said Otunuga.