Who do you think is at the top of President Trump’s “enemies list” nowadays? The authoritarian leaders of China, North Korea, or maybe Iran?

Nope. It’s Jerome Powell.

In a series of tweets and statements this week, President Trump renewed attacks on Federal Reserve Chair Powell, for not taking a more dovish stance on monetary policy. The president on Wednesday tweeted:

“The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt.”

Trump concluded by calling Powell and his Fed colleagues “boneheads.”

Decorum was never Trump’s strong suit. Last month, Trump called Powell the “enemy” and compared him to Chinese Leader Xi Jinping. By haranguing the U.S. central bank, which is supposed to be independent from political pressure, the president also is violating years of established protocol.

Trump is suggesting that the Fed follow the path of European central bankers and embrace interest rates of zero or less. It may beg the question in your mind: what the heck are negative interest rates, anyway? Below I’ll explain, with advice on how to invest your money in this combative and unpredictable environment.

Less than zero…

Commercial banks typically earn interest on the extra reserves they keep at central banks, such as the Fed or ECB.

A policy of negative interest rates compels commercial banks to pay these agencies to keep money in those accounts, an incentive to get banks to boost lending. Consumers in turn benefit from cheaper loans. The intended result is economic stimulus.

President Trump wants to give the U.S. economy a shot in the arm for obvious reasons: increasing signs of a recession threaten his 2020 re-election prospects. Hence his trash talk about Powell (who was appointed by Trump).

Powell and his colleagues have been careful not to overstimulate our economy. That’s their job. The Federal Reserve operates under a mandate from Congress to “promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates.” It’s commonly called the Fed’s “dual mandate.”

Trump is strong-arming the Fed to act like its counterpart in Europe. The ECB yesterday cut interest rates and approved a new round of bond purchases, to goose along the sputtering euro zone economy. The ECB reduced its deposit rate to a record low -0.5% from -0.4% and in November will restart bond purchases of 20 billion euros a month.

The Tweeter-in-Chief’s response to the ECB’s stimulus package was swift and unequivocal, as reflected in this tweet yesterday:

“European Central Bank, acting quickly, Cuts Rates 10 Basis Points. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting U.S. exports…. And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!”

Problem is, it’s erroneous to directly compare Europe’s current economic situation to that of the United States. Inflation is rising in America (albeit only modestly). In Europe, inflation is falling.

The ECB’s latest measures were expected. Purchasing Managers’ Indices (PMIs) around the globe have been declining this year, especially in Europe and the region’s growth engine of Germany.

The ECB is concerned about the prospect of “deflation” in Europe, whereby the change in prices turns negative. Deflation already is occurring throughout the Continent. Under deflationary conditions, people decide to hang onto savings instead of spending money right away, because prices will be lower in the future. A vicious cycle emerges that pulls down the economy. Deflation was a major contributing factor to the Great Depression.

Japan’s experience also comes to mind. The Land of the Rising Sun suffered chronic deflation in the 1990s, leading to a “lost decade” that in many ways resembled the 2008 crisis in the U.S.

Tying the Fed’s hands…

Would another cut from the Federal Reserve do any good? Actually, many analysts warn that further monetary easing would do harm. Negative interest rates are usually considered an emergency remedy. We don’t face an economic emergency, although reckless public policy could very well cause one.

The U.S. economy is stronger than Europe’s and, despite signs of slowing, still exhibits several strengths. Notably, unemployment sits at a 50-year low and wages are rising. Powell hasn’t definitively taken another rate cut off the table, but he has expressed understandable reluctance to ease too aggressively.

You should ignore the partisan hacks and pseudo-economists who appear on CNBC to lobby for another rate cut. Mainstream economists — the folks with actual college degrees in economics — are applauding the central bank’s prudence.

We’ve already had more than a decade of easy money; the party can’t go on forever. Cutting rates to zero or below could fuel inflation and limit the Fed’s options when the recession finally hits.

Indeed, signs of rising inflation are likely to give the Fed pause when it meets next week to consider another rate cut.

The U.S. Labor Department reported Thursday that the core consumer price index, which excludes food and energy, rose 0.3% from the previous month and was up 2.4% from a year earlier, exceeding the median estimates.

Meanwhile, credible economists at major investment banks are forecasting that a recession will hit within 12-18 months. If the Fed cuts interest rates to zero or below, its hands will be tied in fighting the recession. Slashing interest rates to rock bottom levels, when the unemployment rate sits at 3.7%, defies all rules of economic orthodoxy.

Then there’s the massive federal deficit, which limits the fiscal tools at the government’s disposal. The U.S. Treasury Department reported yesterday that the federal government posted a budget deficit of $200 billion in August, putting the U.S. on track for a nearly $1 trillion gap in 2019. The main culprit for the ballooning deficit is the corporate tax cut signed by Trump in December 2017.

If the Fed cuts rates further, the implication would be that the central bank expects a recession — a bearish signal that could topple stocks. Consumers could get spooked, too, and become reluctant to take out loans, even though those loans would be on quite favorable terms. In addition, ultra-low rates would squeeze the profit margins of banks, prompting some to charge extra fees on consumers to bolster earnings.

Also keep in mind that corporate earnings are falling, in large part because of headwinds caused by the trade war. A rate cut would not alleviate the “earnings recession” that currently grips the S&P 500.

Regardless, Wall Street expects the Fed to announce another interest rate cut when it meets next week, and perhaps yet another one before the end of 2019.

Whether Powell announces a cut Wednesday or not, it’s already priced into the market. But as we saw when the Fed cut rates in July, investors often buy on the rumor and sell on the news.

Read This Story: The Fed Cuts Rates…But Stocks Plunge Anyway

As the following table shows, Wednesday is the most significant day on the economic calendar next week (nothing is scheduled for Friday):

By calling for rates of zero or lower, perhaps Trump is trying to “game the refs” to help ensure a cut next week of at least a quarter point.

It’s unclear how the markets would react if there’s a cut.

One thing is clear, though: when Trump delays or cancels threatened tariffs, stocks invariably rise. This cause-and-effect occurred yesterday, after Trump announced that he was postponing the imposition of 5% extra tariffs on Chinese goods by two weeks.

All three main U.S. stock indices closed modestly higher yesterday, once again stoking suspicions that some folks in Washington and on Wall Street are using advance insider knowledge of Trump’s announcements to make windfall gains in the markets.

Read This Story: Volatility…in 280 Characters or Less

That’s not a far-fetched notion, when you consider the power of a single presidential tweet to dramatically move markets in a predictable fashion.

How can you cope with all this turmoil? By picking investments according to their fundamentals and long-term prospects. Stick to value. We’re seeing a market shift occur by which investors are rotating out of growth stocks and into value plays. The momentum stocks that once led the rally are falling out of favor.

As noted above, PMI numbers are tumbling around the world. Utilities and consumer staples sectors tend to be inversely correlated with PMI readings, which makes these two sectors well-timed plays now.

One factor keeping this bull market alive is FOMO (Fear Of Missing Out), which prompts investors to indiscriminately rush into stocks. Stay selective. FOMO is for…well, boneheads.

Here’s another smart strategy: tap into unstoppable “mega-trends” that will unfold regardless of public policy fights, changing political winds, or economic cycles. One such trend is the global roll-out of 5G, the next generation of wireless technology.

The companies involved in developing and deploying 5G will richly reward investors who act early. For our latest report on 5G, click here.

John Persinos is the managing editor of Investing Daily.