The Department of Justice’s investigation into Fed Chair Jerome Powell has sparked concerns that the central bank’s independence is at risk. That could be problematic for U.S. stocks, according to JPMorgan (JPM).
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“The risk around Fed independence is likely to push the US toward near-term underperformance,” said Andrew Tyler, JPMorgan’s Global Head of Market Intelligence.
DOJ Probe Poses Risk to Fed Credibility, Stocks
The Fed’s primary goal is to maximize employment and keep inflation contained. However, bowing to political pressure could undermine its credibility and ability to manage the economy effectively.
Tyler said that the investigation creates an “overhang” for U.S. stocks, despite a positive macroeconomic backdrop and strong corporate fundamentals. He added that a buying opportunity could emerge if the Trump administration eases its challenge to Fed independence.
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