To The Moon

Will pressure on the Fed change rate-cut expectations?

At the margin, yes, but not in the way markets initially fear.

Policy reality: The Federal Reserve’s reaction function remains anchored to inflation, labour data, and financial conditions. A subpoena does not alter the data path, nor does it grant the executive branch control over rates. Chair Jerome Powell and the Federal Reserve are institutionally insulated from direct interference.

Market perception: The bigger impact is on risk premia, not the dot plot. Any perceived erosion of independence forces markets to price uncertainty around future policy consistency, which can delay or shallow the expected rate-cut path even if inflation cooperates.

Net effect for 2026: Rate cuts are still likely if disinflation continues, but the bar for aggressive easing rises. The curve may steepen through term-premium expansion rather than higher policy rates.

In short, political pressure clouds timing and confidence, not the underlying easing bias.

Buy the dip or stay defensive?

That depends on whether the sell-off is liquidity-driven or credibility-driven.

If this remains rhetorical and procedural:

Any equity pullback is likely to be shallow and technical. In that scenario, buy-the-dip remains valid, particularly in quality growth, AI infrastructure, and balance-sheet-strong cyclicals. Markets tend to fade political noise once institutional guardrails hold.

If credibility becomes the narrative:

A sustained challenge to Fed independence would warrant defence. That shifts preference towards cash, short-duration assets, gold, and low-leverage equities. Valuation multiples would compress before fundamentals reassert themselves.

Base case assessment

At present, this looks closer to headline risk than regime change. I would treat an initial sell-off as a selective buy-the-dip, not a broad one, while keeping dry powder and hedges. A genuine defensive stance is only justified if markets begin to price persistent policy unpredictability rather than short-term political confrontation.

In essence, fundamentals still matter more than politics, but politics has become a volatility amplifier.