{"id":884311,"date":"2026-01-12T06:12:20","date_gmt":"2026-01-12T12:12:20","guid":{"rendered":"https:\/\/newsycanuse.com\/index.php\/2026\/01\/12\/sell-america-investors-dump-u-s-assets-in-fear-of-the-end-of-fed-independence\/"},"modified":"2026-01-12T06:12:20","modified_gmt":"2026-01-12T12:12:20","slug":"sell-america-investors-dump-u-s-assets-in-fear-of-the-end-of-fed-independence","status":"publish","type":"post","link":"https:\/\/newsycanuse.com\/index.php\/2026\/01\/12\/sell-america-investors-dump-u-s-assets-in-fear-of-the-end-of-fed-independence\/","title":{"rendered":"\u2018Sell America\u2019: Investors dump U.S. assets in fear of the end of Fed independence"},"content":{"rendered":"
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Whoever replaces Jerome Powell as chairman of the U.S. Federal Reserve in May knows one thing: If they don\u2019t do what President Trump wants, they risk being criminally prosecuted. That was the unambiguous message in Powell\u2019s extraordinary statement yesterday, in which he vowed to continue to set monetary policy independently regardless of the federal grand jury subpoenas investigating his statements to Congress about alleged cost overruns in the renovation of the Fed\u2019s HQ building.\u00a0<\/p>\n

\u201cThis new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. \u2026 Those are pretexts. The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President,\u201d he said<\/a>.<\/p>\n

\u201cThis is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions\u2014or whether instead monetary policy will be directed by political pressure or intimidation.\u201d<\/p>\n<\/div>\n

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Markets moved back into \u201cSell America\u201d mode overnight as traders digested the prospect of an incoming Fed chair who lacks independent credibility: The dollar sank 0.32%<\/a> against a basket of international currencies; the yield on 5-year Treasuries moved sharply up, a sign that investors now regard U.S. government bonds as being suddenly more risky; gold futures\u2014the traditional safe haven\u2014rose 2.21% today to hit a new record high over $4,600 per troy ounce; and S&P 500 futures are down 0.66% this morning prior to the opening bell.<\/p>\n

Wall Street analysts are almost universally negative about the news.<\/p>\n

\u201cThe combined drop in the dollar, equities and Treasuries was a reminiscence of the \u2018sell America\u2019 days of last spring,\u201d ING\u2019s Francesco Pesole told clients this morning. \u201cThe downside risks for the dollar from any indications of further determination to interfere with the Fed\u2019s independence are substantial. Again, the bond market will be the most important barometer, both on the short end of the curve if markets price back in more rate cuts, or in the long end with potential stress signs on independence risks. A sharp steepening of the curve could take the dollar on a fall.\u201d<\/p>\n

At Invesco Asset Management, analyst David Chao told Bloomberg<\/a>, \u201cThe Fed subpoena is another example of how US assets are becoming less attractive \u2026 Not only is the US retrenching behind its Fortress America borders, the country is also becoming more predatory.\u201d<\/p>\n

The subpoenas may also trigger a burst of inflation, according to RBC Capital Markets\u2019 Blake Gwinn<\/a>. \u201cMarkets will start to price in greater inflation expectations, inflation risk premium, and term premium if the Fed\u2019s independence comes under further attack,\u201d he told the Financial Times. \u201cWe don\u2019t appear to have hit it yet, but every action is another step closer to it.\u201d<\/p>\n

Counterintuitively, some analysts think that the investigation now makes near-term interest rate cuts less likely, because Powell and the other members of the Federal Open Markets Committee will be determined to show the markets that they are guided by the data and not legal threats.<\/p>\n

\u201cThe move may also help Fed independence,\u201d UBS\u2019s Paul Donovan said in an email. \u201cPowell\u2019s defiance might signal a reluctance to quit as a Fed governor this year. There are signs the Senate may delay confirming the nomination of a new Fed Chair. Concerns about market reactions and perceptions of institutional independence (in the wake of legal challenges) may become hawkish considerations in setting interest rates.\u201d<\/p>\n

ING\u2019s Pesole said, \u201cMarkets aren\u2019t ready to price in a loss of Fed independence just yet, either on the view that Powell will indeed remain firm in his policy views (as he\u2019s pledged to), the FOMC won\u2019t be heavily affected, or that the DoJ subpoenas aren\u2019t likely to lead to an indictment.\u201d<\/p>\n

Either way, there\u2019s a real sense of uncertainty among asset managers right now. \u201cThe Fed as we have understood it as an institution over the past couple of decades is fading from view. It\u2019s operating in a different environment,\u201d ANZ\u2019s chief economist, Richard Yetsenga, told the FT<\/a>.<\/p>\n

Here\u2019s a snapshot of the markets ahead of the opening bell in New York this morning:<\/strong><\/p>\n