The "Sell America" trade—an investor reaction pattern that hits U.S. stocks, Treasuries, and the dollar all at once—has returned to the center of Wall Street’s attention. The trigger this time: news that the U.S. Department of Justice subpoenaed Federal Reserve Chair Jerome Powell, raising fresh concerns about the Fed’s independence and the stability of U.S. policy institutions.
The reaction wasn’t a full‑blown panic, but it was unmistakable. The dollar weakened, Treasury yields climbed, and equities whipsawed throughout the session. As CNBC reported, the dollar dropped while precious metals surged as investors reassessed the risks to the U.S. financial system. NBC News similarly noted that the DOJ probe "rekindled fears about whether America was still the gold standard for investment," prompting a renewed "Sell America" response. For markets already navigating Trump‑driven policy volatility—from Venezuela energy directives to defense‑sector interventions—the Powell subpoena added yet another layer of uncertainty.
A Week of Trump‑Driven Market Shocks
President Trump’s actions have been moving markets with unusual frequency. In the span of just days:
- He urged U.S. energy companies to invest in Venezuela, sparking a rally in oil stocks.
- He pressured defense companies to halt buybacks and dividends, then reversed tone with a $1.5 trillion defense‑spending pledge, sending defense stocks on a roller coaster.
- And now, the DOJ’s subpoena of Powell has revived fears of political interference in monetary policy.
This last development is the most consequential. As the Financial Express noted, any challenge to the Fed’s independence tends to "spark investor panic," because the central bank is expected to operate free from political pressure.
The subpoena—linked to renovations at the Fed’s headquarters—may seem procedural on the surface. But markets interpreted it as part of a broader confrontation between the Trump administration and the central bank.
Why "Sell America" Matters
The "Sell America" trade is a shorthand for a simultaneous pullback across:
- U.S. equities
- U.S. Treasuries
- The U.S. dollar
It reflects a loss of confidence in U.S. policy stability or institutional credibility. Bloomberg reported that the latest episode "fanned concerns over the central bank’s autonomy," triggering a uniform selloff across major asset classes.
This pattern first re‑emerged last April after Trump’s surprise tariff announcement. Now it’s back—though in a milder form.
U.S. Stocks: A Sharp Drop, Then a Rebound
Equities initially sold off on the Powell news, but the decline didn’t last. Major indices recovered and closed slightly higher, suggesting investors may be growing accustomed to political noise.
Several factors helped limit the damage:
1. "TACO Trading" Expectations
Some traders expect Trump to eventually Threaten, Attack, Concede, and Offer compromise—an emerging pattern that has reduced the shock value of his statements.
2. Powell’s Limited Remaining Term
With only four months left in Powell’s tenure, markets may believe the long‑term policy impact is limited.
3. Powell’s Track Record of Ignoring Political Pressure
Investors have seen Powell resist political interference before, which may have tempered fears.
Still, JPMorgan’s trading desk warned clients that the market should remain cautious, noting that the subpoena raises the stakes for the upcoming Supreme Court ruling on whether Trump can dismiss Fed Governor Lisa Cook.
U.S. Treasuries: Yields Edge Higher
Treasury yields rose modestly, with the 10‑year climbing about 4 basis points before easing. This reaction aligns with the classic "Sell America" pattern, where investors dump dollar‑denominated debt.
But the move was far from dramatic. As Bloomberg reported, the bond market’s reaction was noticeable but not disorderly, reflecting uncertainty rather than panic.
The bigger driver for yields may actually be last week’s strong December jobs report. JPMorgan’s chief U.S. economist now expects:
- No Fed rate cuts in 2026
- A possible rate hike in 2027
If investors conclude the Fed’s easing cycle is over—or that political pressure could push rates higher—Treasury yields could rise further.
The U.S. Dollar: Weakness Deepens
The dollar index fell roughly 0.5% on Monday, continuing a broader trend. CNBC noted that the dollar’s decline was one of the clearest signs of renewed "Sell America" sentiment.
The dollar was already the worst‑performing major currency of 2025, and the Powell subpoena only added to the pressure.
A weaker dollar can help U.S. exporters, but it also signals:
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Reduced global confidence in U.S. institutions
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Concerns about long‑term fiscal and monetary stability
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A shift toward safe‑haven alternatives like gold, which hit new records this week
Quartz reported that gold surged as investors sought protection from political risk and uncertainty around the Fed’s autonomy.
What Happens Next?
The path forward depends on three key variables:
1. The DOJ Investigation
If the probe escalates—or if Trump intensifies public pressure on the Fed—markets could see a more forceful "Sell America" reaction.
2. The Supreme Court Ruling on Lisa Cook
A decision affirming Trump’s authority to dismiss a Fed governor would raise serious questions about the central bank’s independence.
3. The Fed’s Policy Path
If investors conclude that:
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Rate cuts are off the table, and
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Political pressure could push rates higher
then both Treasuries and equities could face renewed volatility.
Market Outlook: Volatility With a Side of Policy Risk
The latest episode shows that markets remain highly sensitive to any sign of political interference in monetary policy. While Monday’s reaction was mild compared to past shocks, the underlying concerns are growing.
Based on current signals:
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Stocks may remain choppy but resilient unless the Fed’s independence is directly compromised.
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Treasury yields could drift higher if the rate‑cut narrative collapses.
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The dollar may continue weakening as investors diversify away from U.S. assets.
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Gold and other safe‑havens are likely to stay strong.
The "Sell America" trade isn’t fully back—but it’s no longer dormant.