Markets Pull Back From US Assets After Powell Investigation Shock

Source: Coindoo Original Title: Markets Pull Back From US Assets After Powell Investigation Shock Original Link: Something investors hadn’t priced in suddenly moved to the front of the queue: institutional risk inside the United States itself.

Following news of a criminal investigation involving Federal Reserve Chair Jerome Powell, global markets began adjusting exposure to US assets, triggering a coordinated pullback across stocks, bonds, and the dollar.

Key Takeaways

• Markets reacted to political pressure on the Federal Reserve by reducing exposure to US stocks, bonds, and the dollar.
• Rising Treasury yields alongside falling equities suggest confidence, not growth, is being repriced.
• Investors rotated into hard assets like gold and silver as hedges against institutional risk.

Rather than a panic-driven selloff, the reaction looked calculated. Money flowed out of assets tied directly to US policy credibility and into areas seen as insulated from political interference.

Markets Vote With Their Feet

US equities opened the week weaker, but the bigger signal was how uniform the move was. There was no rush into defensive sectors, no rotation within equities — just a broad reduction in risk. This type of price action often appears when investors reassess the framework supporting markets, not individual companies.

At the same time, the US dollar slid against major currencies. For a currency that typically benefits during periods of stress, the decline stood out as a warning sign rather than a coincidence.

Bonds Send an Unwelcome Signal

The Treasury market added to the discomfort. Yields on the 10-year note moved higher, even as stocks fell. That combination suggests investors are demanding greater compensation to hold US debt, a sign that confidence — not growth expectations — is being repriced.

Ironically, the bond market’s response undercut the political objective behind the pressure on the Fed. Attempts to force lower interest rates can backfire if investors begin to fear inflation or policy instability, pushing yields higher instead.

Why the Fed Is the Market’s Red Line

For decades, the independence of the Federal Reserve has been one of the pillars supporting US financial dominance. Investors accept lower risk premiums on American assets because monetary policy decisions are expected to remain insulated from short-term political goals.

President Donald Trump has repeatedly criticized Powell for resisting aggressive rate cuts. While verbal attacks have become familiar, markets appear far more sensitive when rhetoric turns into formal action. The investigation marked a shift from pressure to precedent, and investors noticed.

Hard Assets Take Center Stage

As confidence in paper assets weakened, capital rotated into traditional stores of value. Gold surged to new record highs above $4,600 per ounce, while silver jumped even more sharply on a percentage basis. The move reflected a classic hedge against political and institutional uncertainty.

On trading desks, this pattern is often described as the “debasement trade” — buying assets that exist outside the reach of governments and central banks when trust in monetary discipline starts to wobble.

A Ghost From 2025 Reappears

Veteran investors were quick to recognize the setup. A similar “Sell America” trade briefly dominated markets in early 2025 amid trade policy shocks and earlier threats toward the Fed. That episode eventually reversed, but only after tensions cooled and credibility was partially restored.

This time, the catalyst feels different. Markets had learned to ignore hostile language. What they had not priced in was a concrete step that could be interpreted as undermining central bank autonomy.

What Happens Next

So far, the reaction has been orderly, not chaotic. But the direction is unmistakable. Investors are attaching a higher risk premium to US assets when institutional independence appears vulnerable.

Whether the trade deepens or fades will depend on what comes next politically. But the initial response delivers a clear message: America’s market strength is inseparable from trust in its institutions — and when that trust is tested, capital moves fast.