- The S&P 500 and Dow hit record closes on Jan. 12, 2026, shaking off a DOJ criminal probe into Fed Chair Jerome Powell.
- The investigation centers on Powell’s June 2025 Senate testimony about a $2.5B Fed HQ renovation and alleged misstatements about cost overruns and luxury features.
- Markets initially went risk-off—futures dipped, the dollar fell, and gold and bitcoin jumped—before mega-cap tech, including Alphabet’s $4T milestone, drove a rebound.
- Economists and central bank veterans warned the probe could politicize monetary policy, threaten Fed independence, and add a political-risk premium for investors.
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The January 12 market action reveals a tension between political risk and underlying market fundamentals. While the DOJ’s opening of a criminal investigation into Jerome Powell is unprecedented in recent Fed history and immediately rattled markets—especially financials—the broader equity market showed resilience, aided by strong tech sector outperformance.
Key short-term impacts included a sharp sell-off in stock futures, especially financials and credit card issuers, as traders priced in institutional risk. Precious metals and cryptocurrencies spiked as safe havens amid eroding confidence in central bank independence.,,
However, despite these jitters, major indices not only recovered but closed at all-time highs. This suggests that investor confidence remains intact—at least for now—provided that corporate earnings hold up and that external risks (inflation, regulatory, legal) do not dominate. The gains in mega-cap tech, particularly Alphabet’s $4 trillion valuation milestone, were central to cushioning the broader market.,
Strategically, this probe marks a significant escalation in the politicization of monetary policy, posing several risks: erosion of Fed autonomy, uncertainty over leadership (Powell’s term ends in May), and potential shifts in regulatory and legislative oversight. Policymakers opposing the probe—including from both parties—may delay Fed nominations, complicating succession and continuity.,
Looking forward, markets may increasingly factor in a ‘political risk premium,’ especially for sectors sensitive to regulation and interest rates. Upcoming economic data—CPI, inflation, employment—and developments in the investigation itself (e.g. grand jury process, potential indictment or resignation) will likely be major catalysts. Safe assets and inflation hedges may continue to perform strongly in the short term.
Supporting Notes
- S&P 500 rose ~0.2% to 6,976.71, Dow gained ~86 points to 49,590.20, Nasdaq +0.3%; all posted record highs despite early declines tied to the DOJ probe.,,
- Investigation targets Powell’s Senate testimony from June 2025 about a $2.5 billion Fed headquarters renovation; cost overruns reportedly ~$600-700 million with alleged undisclosed “luxury features.”,
- Powell explicitly called the probe a “pretext” for political pressure to force rate cuts, maintaining his commitment to setting policy based on economic data—not presidential preferences.,
- Financial stocks saw sharp declines—Synchrony Financial fell ~8.5%, Capital One ~6–7%, American Express down ~5%—as regulatory and policy headwinds weighed heavily on credit-sensitive institutions.
- Gold surged to new highs over $4,600/oz; the U.S. dollar weakened; Bitcoin rose above $91,000 as investors fled to hard assets and alternate stores of value.,,
- Global central bank leaders, former Fed chairs, and Treasury Secretaries publicly defended Fed independence, warning that the probe could damage long-term financial stability and raise borrowing costs.,