JPMorgan Trading Desk ‘Cautious’ On US Stocks After Fed Probe

Stocks

Summary:

The Trump administration's latest attack on the Federal Reserve's independence poses a threat to the US stock market, at least in the short term, according to JP Morgan Securities LLC's trading desk.

News that the Fed faces a criminal investigation rattled US markets late Sunday, sending equity futures lower with the dollar and driving investors into the safety of gold. S&P 500 futures fell 0.6% as of 9 a.m. in New York.

Fed Chair Jerome Powell said the central bank was served subpoenas relating to his testimony about renovations at Fed headquarters. President Donald Trump, Treasury Secretary Scott Bessent and Kevin Hassett, himself a candidate to lead the Fed, have been among officials who for months have been publicly calling for sharply lower interest rates, putting openly partisan pressure on an institution renowned for its perceived independence.

"While macro and corporate fundamentals support a tactically bullish stance the risk to Fed independence creates an overhang and thus we are cautious in the very near-term," Andrew Tyler, head of global market intelligence, said. "The risk around Fed independence is likely to push the US toward near-term underperformance."

The Trump administration has already sought to fire Fed Governor Lisa Cook, which would create an opening for a Trump appointee. The Supreme Court is slated to hear arguments on the legality of that later this month. Powell said Sunday night the threat of a US criminal indictment was a consequence of a disagreement over monetary policy.

Tyles said that any de-escalation of the administration's push to upend Fed independence could lead to a short-term buying opportunity. It is not clear that the Department of Justice will secure indictments.

Central bank independence is "extremely," important to investor confidence, said Matt Maley, chief market strategist at Miller Tabak + Co LLC. "We believe the outlook for the near-term potential for the stock market has turned negative," he said.

Source: Bloomberg Europe

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JPMorgan Trading Desk ‘Cautious’ On US Stocks After Fed Probe

Source: Bloomberg Europe

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