Investors reacted to the Trump administration’s criminal investigation into Federal Reserve Chair Jerome Powell by initiating a so-called “Sell America” trade, which resulted in sell-offs of US stock futures, bonds, and the dollar on Sunday evening. However, by Monday, markets showed signs of resilience, with US stocks recovering their initial losses to close the day higher. The Dow Jones Industrial Average increased by 86 points, or 0.17%, achieving a record high after having dipped almost 500 points earlier in the day. The broader S&P 500 followed suit, rising 0.16% to also close at a record high. The tech-heavy Nasdaq Composite recorded a 0.26% gain.
Despite the stock recovery, the US dollar faced challenges, weakening against major currencies. The dollar index, which measures the greenback’s strength against six major currencies, fell by 0.24%. Treasury yields also experienced a rise, with the benchmark 10-year yield nearing a one-month high at 4.19%. This increase in yields suggested that the administration’s actions against the Federal Reserve might have adverse effects, undermining the potential for lower interest rates as desired by the president.
The initial market reactions on Sunday night prompted concern in Wall Street, especially given it’s unusual for stocks, bonds, and the dollar to decline simultaneously. By Monday afternoon, while the stock market stabilized, investors remained watchful to see if the upward trend would continue or if stocks might resume their downward trajectory. In contrast, safe-haven assets like gold saw a significant rally, with gold futures rising by 2.5% to surpass $4,600 a troy ounce. Silver outperformed gold, soaring by 7.3% to reach an intraday record high over $86 a troy ounce.
For the time being, stock market investors appeared largely unfazed by the Justice Department’s investigation into Powell. According to Paul Ashworth, chief North America economist at Capital Economics, this response indicates a belief that attempts to undermine the Federal Reserve’s independence may ultimately fail. However, the surges in gold and silver, coupled with pressure on the dollar and Treasuries, suggested that Wall Street was preparing for potential volatility in US markets.
The independence of the Federal Reserve is widely regarded as a fundamental aspect of US financial markets. Investors and economists highlight the significance of an autonomous central bank, indicating that its ability to set monetary policy free from political interference contributes to financial stability. The Trump administration’s previous criticisms of Powell, particularly urging for faster interest rate cuts, exemplified an unusual and concerning challenge to the Fed’s independence.
While lower interest rates typically benefit consumers by reducing borrowing costs, rapid cuts without consideration for inflation can cause market unease and lead investors to demand higher returns for the perceived risk, subsequently increasing yields and borrowing costs for both the government and consumers.
Karl Schamotta, chief market strategist at Corpay, warned in a note that a sustained decline in confidence in the Federal Reserve’s autonomy could negatively affect the dollar, elevate long-term yields, and escalate global market volatility—outcomes misaligned with the administration’s goals.
The market’s reaction over the weekend mirrored previous instances of the “Sell America” trend, reminiscent of the spring of 2025 when investor fears regarding Trump’s trade policies led to significant sell-offs of American assets. After a temporary downturn, markets rebounded sharply when Trump softened some of his stringent tariff threats later that year.
Evercore ISI’s vice chairman, Krishna Guha, expressed that the “Sell America” narrative could gain momentum as risks to Fed independence remain a central theme going forward. He acknowledged that while the market may not see a drastic outcry, investors seem accustomed to Trump’s aggressive rhetoric towards the Fed, particularly as Powell’s term nears its end, minimizing immediate concerns regarding his removal.
The rise in precious metals amidst fears for the Fed’s independence is indicative of what Wall Street has termed the “debasement trade,” highlighting a trend where investors seek hard assets like gold and silver—uncontrolled by the reputational stability of governments or institutions—amid worries that fiat currencies and bonds will diminish in value due to central bank pressures and growing debt burdens.
In the past, markets have experienced brief panics during Trump’s tenure when he openly criticized Powell, casting doubts on the Fed’s leadership. Analysts have noted that while there is an underlying concern about threats to Fed independence, the market had become accustomed to the administration’s challenging rhetoric, which typically did not impact trading unless a clear significant development arose—such as the recent subpoenas that may serve as that crucial turning point.
