Is the Administration on the verge of losing major Wall Street support? Bloomberg writes
It is hard to see the Justice Department’s criminal investigation of Fed Chair Jerome Powell, purportedly for statements surrounding the renovation of the central bank’s headquarters, as anything other than the latest iteration of Trump’s campaign to subjugate the Fed—it is a huge mistake—one that further cede the high ground to Powell.
The Fed’s perceived independence from government whims is a bedrock assumption of US markets and any change to this perception could weigh on sentiment.
It could be now more difficult for Powell Fed to back further rate cuts. If it did, investors would worry that the Fed’s independence is compromised. If Powell Fed lowers rates is because that what the economy needs or is it appease the President?
I believe ultimately the FOMC will act for what is best for the country. The culture, the character of the Federal Reserve, is much stronger and more durable than the demands of one person.
Has the Administration badly miscalculated the environment?
And then there is the President’s demand of capping the interest rate on credit cards at 10%. Yes, there is bipartisan support to lower rates, but such could eviscerate the availability of credit, a point not lost on Congress. Even consumer advocates are questioning such a proposal, stating that credit could disappear for many.
The President is regarded as the master of dominating the media cycle. Has he gone too far?
While it is dangerous to opine politically, both proposals have generated support against the President from both sides of the aisle and from a disparate group of advocates.
And then there is Greenland. Is this just posturing or something of significance? The Administration has rightly challenged complacent assumptions on foreign policy but are Greenland aspirations going too far which may increase global turbulence, escalating confrontations?
It is dangerous to write about politics as such is a lightning rod that causes instant galvanization, risk alienation to a broad expanse of people. This is not the intent, attempting to discuss in hopefully a nonpolitical manner the environment at hand if this is remotely possible. We are living in incredible times with so many cross currents and unfortunately potentially everything is viewed through a political lens.
Equity markets opened lower on the headlines but managed to rebound to post modest gains. Treasury prices also retraced some earlier losses, but the yield curve was steeper across the curve perhaps under the guise that the Fed might lose its perceived inflation fighting prowess if forced to succumb to political will.
Today is the release of December’s CPI. Inflation is expected to remain unchanged, stubbornly stuck in a tight range considerably higher than the Federal Reserve’s mandated 2% speed limit.
Last night the foreign markets were mixed. London was down 0.03%, Paris down 0.38% and Frankfurt down 0.01%. China was down 0.64%, Japan up 3.10% and Hang Seng up 0.90%.
Futures are flat. JPM commenced earnings season, results that exceeded expectations. Shares are nominally higher. The 10-year is off 9/32 to yield 4.19%.
