Treasury Secretary Scott Bessent has privately warned President Trump that the federal investigation into Federal Reserve Chair Jerome Powell has “made a mess” and could destabilise financial markets, according to Axios. While Bessent did not dispute the need for a full investigation, he emphasised that the timing and political optics are risky—particularly for markets that rely on the Federal Reserve’s independence and credibility.
Bessent’s concerns stem from expectations around the Fed leadership transition. It was assumed that once President Trump appointed a new Fed chair, Powell would step down in an orderly manner. However, the investigation altered this dynamic. Instead of departing quietly, Powell now appears poised to resist, creating a prolonged and politically charged standoff that adds further uncertainty for investors. Bessent warned that this development “made a mess” of what should have been a smooth handover.
On Sunday night, President Trump denied any knowledge of a Justice Department investigation into Powell, telling reporters, “I don’t know anything about it, but he’s certainly not very good at the Fed, and he’s not very good at building buildings.”
Powell responded with a defiant yet measured tone, stating, “No one—certainly not the chair of the Federal Reserve—is above the law, but this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.”
Markets initially reacted cautiously. Stocks dipped on the news, as investors factored in the risk that political pressure on the Fed could undermine its independence and complicate monetary policy decisions at a critical economic juncture. However, the weakness was quickly bought.
By mid-session, the NASDAQ had rebounded strongly, trading near record highs at 23,791.85—up 122 points or 0.51%. The index reached a session high of 23,800.52, approaching its all-time peak of 23,958.47. Earlier, it had fallen to as low as 23,562.97, down 108 points, demonstrating how swiftly sentiment reversed once dip buyers entered.
The S&P 500 also recovered from early losses, climbing 16.50 points or 0.24% to 6,982.66. It had earlier dropped to 6,934.07, down 32.21 points, before rallying alongside the tech sector. The S&P is on track for a record close today.
For forex traders, the market’s reaction highlights that while political risks around the Fed remain a concern, investors continue to buy on dips as long as liquidity, earnings, and growth prospects hold up. Stocks are currently discounting the political noise, but ongoing tension between the White House and the Fed could keep uncertainty elevated. Traders should therefore monitor developments closely, as any sustained conflict may have broader implications for monetary policy and market stability.
Original Source: Greg Michalowski of investinglive.com
