Why the stock market keeps shrugging as Trump sows more political chaos

• Markets initially sold off on fears the investigation represented a broader push to strip away the Fed's autonomy in setting interest rates
• Republican opposition became clearer throughout Monday, with Sen. Tillis pledging to block Trump's Fed nominees, giving traders confidence the situation would not escalate
• Safe-haven assets like gold and silver climbed to new highs and the dollar slid against peers, showing some investor concern despite the stock market recovery

Summary

The S&P 500 recovered from an initial 500-point decline to close at all-time highs Monday, despite a criminal investigation into Federal Reserve Chair Jerome Powell. The market's resilience contradicts conventional wisdom that political turmoil typically drives down stocks as traders hedge risks.

Key Market Movements:

• The Dow, S&P 500, and Russell small-cap index all reversed losses to close at record highs
• The VIX (volatility index) jumped but remained within recent trading ranges
• The U.S. dollar weakened against peers
• Safe-haven assets gold and silver rallied to new highs
• U.S. stocks underperformed international markets this week

Market Drivers:

Investor confidence was bolstered by vocal support for Powell from global economists and clear Republican opposition to the investigation. Sen. Thom Tillis (R-N.C.) pledged to block Trump's Fed nominees in response. Economists suggested the investigation stems more from frustration over slow interest rate cuts than Fed independence concerns.

However, former Fed Chair (name not specified in article) expressed surprise at the market's lack of concern. Some analysts questioned whether this represented a temporary flare-up or indicated a resurgence of the "America risk premium."

Looking Ahead:

By Tuesday, investors had shifted focus to Q4 earnings season and inflation data. Siebert Financial CIO Mark Malek noted that investors either expect the situation to resolve or are choosing to prioritize upcoming earnings reports over political noise.

The mixed signals across asset classes—with stocks rallying while defensive assets also gained—suggest markets remain cautiously optimistic while hedging against potential escalation.