Economy January 13, 2026

Market Overview

Global markets are navigating elevated policy uncertainty and commodity-driven risk premia as a criminal investigation into Federal Reserve Chair Jerome Powell and escalating U.S.–Iran tensions collide with persistent inflationary signals in parts of the world. The Powell probe and ensuing political pressure have sparked concerns about Fed independence and near-term monetary policy signaling, creating volatility in risk assets and a hunt for safe havens [2][15][17]. At the same time, supply-risk dynamics tied to Iran — particularly the Strait of Hormuz chokepoint — have pushed oil and gold higher while weighing on the dollar and risk sentiment in energy-sensitive sectors [25][18][8][6]. Regional equity markets have been bifurcated: Asia showed resilience with record closes in indices like South Korea’s Kospi, suggesting risk-on flows in some areas despite global headwinds [11][19].

Key Developments

1. Fed credibility and market reaction: The revelation that Fed Chair Powell is under criminal investigation has amplified uncertainty over the Fed’s decision-making independence and future rate paths; while markets have been relatively muted, policymakers and some officials have expressed concern about the implications for monetary policy [2][15][17].

2. Safe-haven surge and currency moves: Gold set new highs as investors sought protection, and the dollar softened amid the “Sell America” trade narrative tied to political interference in the Fed and broader concerns about U.S. policy risk [8][6].

3. Geopolitical supply risk: Heightened U.S.–Iran tensions and talk of intervention have refocused attention on oil logistics and the potential for significant price spikes if choke points like the Strait of Hormuz are disrupted [25][18].

4. Policy proposals with economic spillovers: Proposals such as a U.S. credit card rate cap and tariffs targeting countries doing business with Iran introduce policy risk for banks, consumer credit markets, and international trade dynamics [10][1].

5. Regional inflation and valuations: India’s inflation pickup (driven by food) and very large tech market capitalizations (e.g., Alphabet passing $4 trillion) are additional factors shaping regional monetary outlooks and equity concentration risk [14][13].

Financial Impact

Monetary policy uncertainty raises the risk premium on duration and could widen credit spreads if markets price in a diminished Fed independence or an abrupt shift in communication. Safe-haven flows into gold and government bonds are likely to persist while risk assets price in a higher probability of policy error or political interference [8][6][2]. Oil-price upside from supply disruptions would feed through to headline inflation in import-dependent economies, complicating central bank decisions—particularly where inflation is already above target, as in parts of Asia and emerging markets [25][18][14].

A binding credit-card rate cap would sharply compress net interest margins and increase credit rationing risk among banks, pressuring profitability for lenders focused on card portfolios and higher-risk borrowers [10]. Tariff threats tied to Iran-related commerce introduce trade-cost uncertainty that could disrupt supply chains and raise costs for exporters and commodity traders [1]. Longer-term, elevated geopolitical risk can incentivize portfolio shifts toward energy producers, defense contractors and inflation hedges while penalizing highly leveraged, interest-rate-sensitive sectors.

Market Outlook

Base case (near term): Continued volatility with periodic safe-haven rallies; equity leadership may remain narrow as large-cap tech and quality names absorb flows while cyclical and financial sectors react to policy headlines [13][11].

Stress case: A material disruption to oil transit or escalation in sanctions triggers sharp oil-price spikes, accelerating headline inflation and forcing central banks to choose between growth and inflation stability—this would favor commodities and gold while pressuring rates-sensitive assets [25][18][8].

Policy-watch: Monitor developments on the Powell investigation and legislative proposals (credit-card caps, tariffs) closely; these are the most direct channels to shift Fed behavior, bank profitability and consumer credit conditions [15][10][1]. Also track India inflation prints and regional economic data for signs of broader inflation persistence [14].

For portfolio managers: prioritize liquidity, hedge duration risk, increase allocation to inflation hedges (gold, select commodities), stress-test bank and consumer-credit exposures under rate-cap scenarios, and maintain tactical energy exposure given asymmetric upside risk from supply disruptions [6][8][10][25].