Potential Turning Point in Market Sentiment ?4

09:55 12-Jan-26

Adding weight to the backlash, a Republican swing vote on the Senate Banking Committee has stated:

If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none. It is now the independence and credibility of the Department of Justice that are in question.  I will oppose the confirmation of any nominee for the Fed —including the upcoming Fed Chair vacancy— until this legal matter is fully resolved.

Tillis was retiring anyway, but this still validates the peak Trump pronouncements made by this service in the latter half of November.

As for market indexes, early trading and a moderate drop in the dollar against all major currencies seems to point to prolonged slide rather than a sharp dip and quick recovery.  However, that would differ from recent trading behavior, and nobody can be sure of the exact market shape to come.

Esekla published the following update at CrowdWisers last night:

A short while ago, Fed Chair Powell made this statement, documenting grand jury subpoenas threatening criminal indictment for his testimony to the Senate Banking Committee last June.  His response is similar to state and city authorities below in implying that the executive branch of the federal government can no longer be taken at its word.  Instead he says this is a threat to independent decision making by the Fed.  Powell goes a step further to say that "public service sometimes requires standing firm in the face of threats", and that he will continue to do the job the Senate confirmed him to do.

I think this was for foreshadowed by Powell's commencement speech at his alma mater at the end of May, which gave me:

a modicum of hope that both he and America will find the backbone I'm hoping for in the bottom paragraph below.  In Powell's case, that would be by remaining in his post after his leadership role expires, thereby avoiding yet another sycophant appointee.

American equity futures are negative on the news, which has yet to garner mainstream analysis.  Though Trump has denied any knowledge of the legal action, I do see this as an attempt to force Powell out of his voting position. As, I documented on April 22nd:

The media is rife with angst over a loss of confidence in American debt and Fed independence.  I saw ample reason for the former as early as 2018, affirmed the effect on global trade in 2020, and updated on the big picture as recently as December, before heralding the exodus message from currencies at the beginning of this month.  The slightly delayed reaction is very typical of foreign investment, and though that exodus may continue over the long term, I think explaining why I doubt much will come of the latter point will also support my suspicion that we're finally seeing the height of short term capitulation.

Powell's tenure as Chair expires on May 15, 2026.  He could remain a voting member of the FOMC until the end of January 2028, but the precedent is for board governors to step down after relinquishing leadership.  It should go without saying that the current environment could easily be seen as downplaying precedent, but I'm applying that view mainly to Powell's choice.  I've seen posts from sites that I won't dignify with a link seriously contending that Trump will try to fire Powell this week.  Such a blunder would cause more short term market pain, but could ultimately be beneficial by putting the issue to rest before the midterms, and thereby further normalizing abuse of executive powers.  Unfortunately, seeking headlines and deflecting blame are more in character.

My thought there "that the exodus may be overdone for the short term" has proved correct, and so was my prediction that the the Supreme Court would give special status to Fed independence.  Despite lack of a market turning point on Friday, I think the Mercosur free trade agreement is yet another reason why my anticipation of imminent pivot may also be on target.

On 1/9/26 10:17 AM, CrowdWisers Administration wrote:

BBC radio has just reported that there will be no IEEPA ruling from the SCotUS today.  Though public sentiment continues to shift, this seems to rule out an immediate market pivot.

On 1/9/26 8:58 AM, CrowdWisers Administration wrote:

Two more people have been shot by federal agents in Portland.  According to DHS:

At 2:19 PST, US Border Patrol agents were conducting a targeted vehicle stop in Portland, Oregon. The passenger of the vehicle and target is a Venezuelan illegal alien affiliated with the transnational Tren de Aragua prostitution ring and involved in a recent shooting in Portland. The vehicle driver is believed to be a member of the vicious Venezuelan gang Tren de Aragua. When agents identified themselves to the vehicle occupants, the driver weaponized his vehicle and attempted to run over the law enforcement agents. 

Fearing for his life and safety, an agent fired defensive shots. The driver drove off with the passenger, fleeing the scene. 

However, after yesterday's press conference where Vance other White House officials contradicted video evidence and eyewitness accounts by doubling down on claims that the Minneapolis ICE killing was self defense rather than unprovoked murder, the mayor of Portland stated:

We know what the federal government says happened here. There was a time when we could take them on their word. That time has long passed. We are calling on ICE to halt all operations in Portland until a full investigation can take place.

Markets have shown little reaction to any of this so far, but the shifting mood is reflected in the Senate, where five Republicans joined Democrats to pass a symbolic war powers resolution that had failed previously.  The seized tanker count is now up to five.

BLS employment data for December came in at +50K and 4.4% versus forecasts for +70K or more and 4.5%.  Hourly earnings were +0.3% as expected.  The Employment Population Ratio and Participation Rate edged up and down trivially, to 59.7% and 62.4%.  American equity futures are showing a moderately positive response to this data, and FedWatch now shows less than a 3% chance for rate cut at the next meeting.  So, it looks like the market is set to retain its short term financial focus for the time being, but we'll what the Supreme Court has to say.

On 1/8/26 11:02 AM, CrowdWisers Administration wrote:

There will be a White House press conference at 1PM today.  This note will be updated on the events below from our parent CrowdWisers service. 

On 1/8/26 10:04 AM, Esekla wrote:

Trump has pulled America out of more than 66 international bodies including 31 at the U.N.  This has drawn widespread criticism, but markets only care about money, and thus are likely to ignore the long term impacts until they directly impact indexes.  However, that time may be imminent as federal attempts to control the narrative around unjustified violence and lack of due process in the course of ICE operations face their latest hurdle with the shooting of 37 year old woman in Minneapolis.  After watching video of the event, both the governor and mayor have contested federal claims that the shooting was in self-defense.

It remains to be seen how much investors will trust government jobs data tomorrow morning.  However, a cwMacro article published a month ago marked the SCotUS decision on IEEPA tariffs expected around 10AM as an event that that could throw the market into a tailspin.  That should be followed by statements from White House meetings with American oil companies about Venezuela, and I will be watching how trading evolves throughout the day very carefully.

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