Trump vs. The Fed: Why markets are nervous

Good Morning,

– Truly yours, Fred Frost

📉 Yesterday's Market Recap

Yesterday, markets stumbled as investors wrestled with mixed signals from tech earnings and lingering inflation concerns. The Dow dipped 0.3%, while the Nasdaq eked out a 0.1% gain on late buying in semiconductors. Key movers included healthcare and energy, though consumer confidence data kept sentiment in check.

• Tech Sector Volatility: Credo Technology Group (CRDO) jumped on optimism despite a lofty P/E ratio of 103.0, signaling high expectations but potential overvaluation risks. → Benzinga


• China’s Record $1.2T Trade Surplus: China posted a historic $1.19 trillion trade surplus for 2025, up 20% year-over-year, driven by a 6.6% export surge in December despite U.S. trade tensions. → CNBC


• Energy Sector Watch: CenterPoint Energy (CNP) held steady as analysts set a $42.0 average price target, reflecting cautious optimism amid utility sector lag. → Seeking Alpha

📉 Daily Performance Snapshot

🔭 What to Watch Today

Today’s calendar brings potential market movers with earnings releases and geopolitical developments. Keep your eyes on these events for ripples across sectors.

💡 Opportunity Watch

Amidst market turbulence, a few themes stand out for potential upside. Whether it’s tech innovation or undervalued sectors, here are spots to consider for your portfolio.

• Alibaba’s AI Open-Source Surge (BABA): Alibaba’s Qwen AI models hit 700 million downloads, driving a 104% stock rally in 12 months, with cloud computing poised for growth. → Benzinga
• TTM Technologies Growth Outlook (TTMI): TTM Technologies stock soared 20% after projecting 15-20% annual revenue growth for three years, signaling strength in tech manufacturing. → Seeking Alpha
• Gelteq’s Cannabinoid Breakthrough (GELS): Gelteq shares jumped 50% pre-market on positive preclinical results for its oral gel delivery platform, showing 22% higher bioavailability. → Benzinga

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🔥 The Big Bullet

Trump Increases Pressure on Federal Reserve Independence

What happened: President Donald Trump is publicly criticizing the Federal Reserve again. During a recent speech in Michigan, he claimed that his tariff policies are successfully reviving the auto industry. He used this moment to argue that his economic plans are superior to the central bank's current strategy. The President believes the Fed should align its interest rate decisions with his administration's goals for manufacturing. This creates a direct conflict between the White House and monetary policymakers. It marks a tense moment for the country's financial leadership.

Why it matters: Markets hate uncertainty, and this feud creates plenty of it. When political leaders clash with central bankers, investors often get nervous about the future value of money. We saw this unease recently as the Dow, S&P 500, and Nasdaq all dipped lower in trading. If the Fed loses its independence, it might keep rates too low for political reasons, which could spark inflation. Stable interest rates are essential for businesses to plan and for families to protect their savings. A shift here could change the rules for borrowing and investing for years.

What’s next: A critical legal battle is set to unfold very soon. On January 21, the Supreme Court will hear arguments that could determine the future of the Fed's independence. Investors should watch this date closely, as the outcome may cause volatility in stock and bond prices. We also need to monitor geopolitical shocks, such as the sudden arrest of Venezuela's leader, which could impact oil markets. These combined events suggest a rocky road ahead for the economy in the short term.

• The specific tactics the administration is using to pressure the central bank, including a criminal probe into renovation costs, and why economists fear this could lead to 1970s-style inflation if the Fed loses its ability to set rates independently. – NPR
• This legal analysis details exactly what is at stake: whether the Supreme Court will decide that the President has the constitutional power to fire Federal Reserve governors at will, effectively ending the bank's political neutrality. – Scotusblog.com
• Why, despite the "shock," investors shouldn't expect an immediate flood of new oil to lower prices, as rebuilding Venezuela's infrastructure will take years of capital investment. – Kingsview.com

🧭 Policy & Market Ripples

• NYC Housing Policy Fallout: Mayor Mamdani’s ideologically driven housing plans face backlash as a showcased nonprofit-managed building reveals 200+ code violations, hinting at broader mismanagement risks. → Daily Signal
• Starlink Free in Iran: Elon Musk’s SpaceX reportedly offers free Starlink access in Iran amid protests and blackouts, a move that could boost goodwill but raises geopolitical questions. → Stocktwits
• Anti-ICE Riots Escalate: Nationwide unrest over immigration enforcement grows after a fatal incident in Minneapolis, with political rhetoric fueling tensions and potential disruptions in key cities. → Daily Signal