Dear Reader,
Good Morning, this is Dylan Jovine with Behind the Markets.
Happy Tuesday.
Today is Tuesday, January 13th — and when I said yesterday that 2026 was going to be an eventful year, I was not exaggerating.
When I recorded yesterday's video, the story had just broken the night before that President Trump's Department of Justice had opened a criminal investigation into Jerome Powell, the Chair of the Federal Reserve.
Ostensibly, this is about the Federal Reserve building a new headquarters — with the claim being that the DOJ is looking into whether there was any corruption involved.
Frankly, nobody believes that explanation.
The prevailing view is that this is another example of lawfare — using the legal system to apply pressure — with the goal of forcing Powell out ahead of the end of his term, which expires in May.
I don't really see the upside here.
Historically speaking, the United States used to have extremely high interest rates. When we created an independent Federal Reserve, the idea was to insulate monetary policy from political pressure so the economy could be managed more responsibly over the long term. And over time, that independence helped push long-term rates lower.
When a president controls the Federal Reserve — or is perceived to control it — monetary policy becomes a political tool.
This president clearly prizes economic growth, deficit spending, debt, and tax relief. And the moment it looked like the Fed's independence might be under threat, the market reacted immediately.
Gold surged roughly 3% and smashed through to a new record around $4,600.
That move is telling you something very important.
When markets believe monetary policy is going to be driven by political priorities rather than data, inflation expectations rise. Interest rates start creeping higher — exactly what we saw happen yesterday.
Historically, that's not a great setup for countries.
Now imagine where this goes.
If a president successfully weakens the Fed's independence, the next president could prioritize entirely different political goals. One might push for looser policy to support homeownership for certain income groups. Another might push policy in a different ideological direction altogether.
Once that door is opened, the Federal Reserve becomes just another political instrument.
And I'm one of those people who believes that the only thing worse than an independent Fed is a Fed that's openly beholden to political pressure.
We've seen this movie before.
In the 1970s, Richard Nixon pressured Fed Chair Arthur Burns. Burns was a serious economist with good instincts, but under political pressure, he buckled. That decision helped fuel inflation that haunted the country for years.
Human nature hasn't changed.
For his part, Powell has come out and said this is political — that Trump wants rates lowered faster than the data supports.
So there's a lot going on here.
And while all of this creates risk, it also creates opportunity — which is what we focus on.
As an aside, I was at a dinner the other night with a group of friends, and the conversation turned to lawfare. Some were saying it's something the left invented. Others said the right does it too.
Normally, I avoid political conversations altogether. I was raised to believe you don't talk about religion or politics in public.
But I felt compelled to jump in.
I reminded them that Nixon would probably disagree that lawfare is new. So would Bill Clinton. And long before them, the Romans essentially invented the concept.
The Romans believed the best way to stop a political opponent was to tie them up in law.
Think of it like football.
If the other party's offense is on the field, your defense is to slow them down — tie them up in Congress, in courts, in legal process. This idea is as old as politics itself.
There is nothing new under the sun when it comes to power and human behavior.
Trump, in many ways, is very Nixonian. That generation used power aggressively — maybe not as openly as today, but just as forcefully.
And none of this surprises me.
That said, I remain a strong believer in keeping the Federal Reserve independent.
But humans are going to do what humans do.
And our job is to understand it early — and profit from it intelligently.
That's why we designed a service designed to profit no matter which way the market is moving.
Look around you. It's not hard to see that the biggest players on Wall Street aren't playing fair.
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In the coming days, I'll talk more about defense spending, Trump's push to cap credit card interest rates at 10% — which is clearly a bid for the midterms — and yes, if conditions deteriorate enough, I'll be recommending credit card stocks.
I promise you that.
For today, I just wanted to help you make sense of what's happening with the Fed Chair and why markets reacted the way they did.
That's all I have for you.
Have a great day.
I'll see you tomorrow.
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