New York – Financial markets faced significant downward pressure following news that federal prosecutors have launched a criminal investigation into Jerome Powell, the Chair of the U.S. Federal Reserve. The development sparked a revival of what traders have dubbed the "Sell America" trade, characterized by the widespread selling of U.S. assets including stocks, government bonds, and the dollar itself.
On Monday morning, futures tracking major U.S. equity indices moved sharply lower. Dow futures dropped approximately 350 points, down about 0.7%, while S&P 500 futures fell 0.6%. Nasdaq-linked futures declined by nearly 0.9% as investors adjusted their expectations amid the escalating political tensions involving the Federal Reserve's leadership.
Currency markets also reflected these concerns, with the U.S. dollar weakening against several major global currencies. The dollar index, which measures its strength relative to six key currencies, declined roughly 0.4% in a significant dip for the greenback. Treasuries suffered losses as well; the yield on the benchmark 10-year note climbed to just under 4.2%, close to a one-month high. Given the inverse relationship between bond prices and yields, this increase signals decreased bond prices and heightened risk perceptions.
These movements suggest that the Trump administration's actions against the Fed could be counterproductive to the president's stated desire for lower interest rates. The rise in yields indicates that investors may demand higher returns on U.S. debt amid growing concerns over political interference with monetary policy.
Financial experts and market participants widely regard the Federal Reserve's independence as a fundamental pillar that underpins the stability and credibility of U.S. financial markets. The ability of central bankers to set policy free from direct political pressures is seen as essential for maintaining investors' confidence and controlling inflation dynamics.
Last year, the Trump administration publicly challenged this independence by criticizing Powell for not cutting interest rates as rapidly as the president desired. Lowering rates can reduce borrowing costs for consumers and businesses but doing so prematurely or excessively risks igniting inflation and unsettling markets, as investors might start to fear that unchecked inflation will erode asset values.
Krishna Guha, vice chairman at Evercore ISI, described the market's reaction as "unambiguously risk off," reacting defensively to the uncertainty surrounding the Federal Reserve's leadership and its policy direction. Monday's market activity resembles the "Sell America" trade observed in the spring of 2025, when investor fear over trade tensions and potential tariff policies led to a significant retreat from U.S. assets. The earlier episode saw government bonds and the dollar plummet, and equities approach bear market territory before rebounding when some trade threats were rescinded.
Guha anticipates that Monday's declines in the dollar, bonds, and stocks reflect global investors demanding a higher risk premium for assets linked to the United States amid the current political and monetary policy uncertainty. At the same time, safe-haven assets such as gold and silver are poised to benefit from the increased demand for refuge amid market turbulence.
Consistent with this view, gold prices surged 2%, reaching a record high above $4,600 per troy ounce, while silver outperformed with gains of 6%. The rally in precious metals highlights what Wall Street analysts have termed the "debasement trade". This phenomenon describes investors shifting into tangible commodities not reliant on government backing or institutional credibility, in response to concerns over weakening currencies, mounting public debt, and perceived threats to the independence of central banks.
Throughout 2025, markets experienced moments of unease as President Donald Trump publicly criticized Powell's pace of rate cuts, branding him "too late" in responding to economic conditions and questioning his capability to lead the Federal Reserve. Although such hostile rhetoric had become somewhat normalized by investors, allowing markets to largely absorb the noise without severe reactions, the formal criminal investigation and its associated subpoenas appear to have provided a more concrete justification for market participants to recalibrate risk assessments sharply downward.
Guha noted that while previous threats to Fed autonomy mostly involved verbal confrontations, this week’s legal actions represent a "coordinating proof point" that may unify investor concerns and heighten market volatility. The unfolding situation underscores the fragility of investor confidence in U.S. monetary governance and the potent influence political dynamics can have on financial markets, especially when they challenge foundational institutional norms.
As the investigation proceeds, market participants will closely monitor developments for further indications on the Federal Reserve’s future policy trajectory and its ability to operate free from political interference. The interplay of these factors will likely continue to shape asset valuations, capital flows, and broader sentiment toward U.S. financial stability in the near term.