Good morning, investors. Earnings season is underway and stocks keep hitting new records, yet the most important topic across Wall Street and Washington is Fed independence and what a post-Jerome Powell Fed looks like.

Bigger problem than Powell

Investors may finally get the rate cuts they’ve been waiting for, but they may not like the way they arrive. 

Markets should be asking how the Fed eases policy as much as they ask when. If political pressure — rather than economic data — drives the next move, it risks weakening the central bank’s credibility and undermining global trust in US monetary policy.

That tension has come into sharper focus over the last several days: 

• Treasury Secretary Scott Bessent called for a sweeping review of the entire Federal Reserve system

• Republican US Representative Anna Paulina Luna formally referred Fed Chair Jerome Powell to the Justice Department over alleged misleading testimony to Congress

• Fed Governor Christopher Waller said he will vote for an immediate rate cut

“[H]as the organization succeeded in its mission? If this were the FAA and we were having this many mistakes, we would go back and look at why this has happened.” Bessent said. 

And while President Trump has denied rumors that he plans to fire Powell, he has repeatedly slammed him for mismanaging the Fed. Among the president’s recent quotes on the chairman:

• “Powell is a knucklehead.”

• “Jerome Powell is a real dummy.”

• “Mr. Too Late”

• “He should cut interest rates by 3% and do it immediately.”

To be clear, the president, investors, and everyday Americans are right to be frustrated with Powell’s inaction.

Opening Bell Daily does believe the data warrants rate cuts. 

But even so, eroding the Fed’s credibility poses a long-term risk to markets. 

As Opening Bell Daily reported Monday, Fed Governor Waller’s call for a cut is logically consistent — inflation has indeed moderated and the labor market is cracking. 

But the timing of his speech has raised political questions. If Waller or someone like him succeeds Powell, then markets will be justified in questioning whether the Fed’s decisions are driven by data or the White House.

The global financial system rests, in part, on the idea that the Fed operates above the political fray.

Undermining that now — with US debt at record highs — could invite far more volatility than any single rate decision. 

“Firing Powell might be the quickest way to incentivize central banks to find [an alternative to US Treasurys],” wrote veteran economist Ed Yardeni in a note to clients early Monday. 

Markets will continue to cheer the prospect of lower rates. But if global investors sense even a whiff of political coercion, it may not matter how low the Fed goes. 

Credibility, once shaken, is harder to restore than interest rates are to adjust.

In the near-term, monetary easing will likely lift asset prices.

But beyond that, a Fed that appears politically compromised could send bond yields higher, weaken the dollar, and prompt foreign holders of US Treasurys to question America’s economic leadership.

Market snapshot

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Elsewhere

✅ Stocks hit another record closing high. The Nasdaq Composite closed higher for the sixth trading day in a row, and the S&P 500 eked out an all-time high of its own despite a late-day pullback.

🏦Jerome Powell has been referred to the DOJ for criminal charges. A Republican lawmaker said it’s based on his $2.5 billion renovation to the Federal Reserve building, and Powell is accused of lying about the project’s scope. However, no formal charges have been filed. (Reuters)

📈Consumers are ramping up spending. Fears of an economic downturn have eased in the last several months, and major financial institutions are pulling back their recession calls. Small-business owners are increasingly optimistic, and consumer confidence is suddenly bouncing back. (WSJ)

Rapid-fire

• Prediction markets see 94% odds the Fed doesn’t change rates at the July meeting (Kalshi)

• Opendoor Technologies is the market’s newest meme stock and it rallied 42% Monday (Barron’s)

• The new CEO of Astronomer gave his first statement after the Coldplay kiss-cam scandal (CNBC)

• AI is splintering the fortunes of Big Tech names as stock returns diverge (WSJ)

• Positive earnings results from Alphabet and other Mag-7 names could bode well for Nvidia’s outlook (Barron’s)

• Digital asset products just saw their largest weekly inflows on record at $4.39 billion (CoinShares)

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Last thing

About me

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at [email protected].