1.12 Breaking News: Powell Under Criminal Investigation! Impact Pathways on Financial Markets and Trading Insights

Core Conclusion: The market's panic is not about Powell's personal departure or stay, but about the potential political interference in the Federal Reserve's independence, which could impact the monetary policy framework and the US dollar's credibility, triggering chain reactions in the short, medium, and long term.

Event Overview

On January 9, the Department of Justice issued a subpoena to the Federal Reserve, threatening criminal charges related to Powell's June 2025 Congressional testimony (involving the headquarters renovation project); the investigation was approved last November. Powell stated it was a government attempt to pressure for rate cuts and emphasized maintaining independence.

Impact Pathways and Market Performance

- Short-term direct impact

- Volatility spikes: US stock futures weaken (Nasdaq futures down 0.7%), US dollar index declines, VIX rises; gold breaks $4,600/oz, silver gains over 4%, and safe-haven currencies like the Swiss franc strengthen.

- Policy expectation confusion: Market difficulty in judging the interest rate path increases sharply, with concerns that decision-making shifts from "data-driven" to "politically driven."

- Medium-term structural risks (core concerns)

- Erosion of independence: The risk of personnel appointments undermining independence is more concerning (Evercore ISI); if policies are interfered with, long-term inflation expectations could rise, bond markets may become volatile, and the US dollar's credibility and reserve currency status could weaken.

- Rising financing costs: Cracks in Fed independence could push up long-term borrowing costs, increase US debt interest burdens, and trigger capital outflows and dollar depreciation.

- Long-term uncertainty

- Powell's term ends in May 2026. If a new chair is more compliant with political preferences, the Fed's "reaction function" may shift toward supporting growth and debt financing, weakening the priority of anti-inflation measures, potentially accelerating de-dollarization globally.

Trading Insights

- Short-term strategy: Prioritize safe-haven assets such as gold, silver, and Swiss franc; remain cautious on US stocks and the dollar, control positions tightly in high-volatility environments, and use options to hedge risks.

- Medium-term observation: Keep a close eye on investigation progress, White House statements, and Fed officials' speeches. Focus on tracking inflation expectations (TIPS implied inflation rate) and US Treasury yield curve changes, and be alert to signals of further erosion of independence.

- Cryptocurrencies: Elevated macro uncertainty may boost safe-haven demand. Monitor the correlation of main cryptocurrencies like BTC and ETH with gold, while also paying attention to the pullback pressures caused by volatility transmission in risk assets.