Political Heat on the Fed

Here we go again. Markets are getting whippy despite printing fresh all-time highs not long ago, and this time the culprit isn't inflation data or employment figures. It's politics.

Donald Trump has been vocal about his views on Federal Reserve policy, arguing that rate hikes kill market rallies and that strong economic growth should mean lower rates, not tighter policy. The playbook isn't new, but the timing matters.

The real danger here isn't the commentary itself. Politicians have always had opinions about interest rates. The problem emerges if markets start interpreting these remarks as actual policy signals rather than political noise. That's when confidence in Fed independence starts to crack, and that's when things get messy.

Inflation Takes a Breather

Meanwhile, the latest CPI reading landed at 2.7%, exactly where economists expected it. No surprises, no drama. And that's kind of the point: inflation just isn't the main character in this story anymore.

Instead, investors are focused on tariffs, fiscal policy moves, and the broader fog of political uncertainty. With stimulus still flowing through the system and monetary conditions remaining relatively accommodative, inflation looks like it's settling into a range rather than collapsing or spiking in a way that would force the Fed's hand.

The Credit Card Bomb

But if you want to talk about real market impact, look at what happened to bank stocks. A proposal to cap credit card APRs at 10% for one year hit the wires and immediately sent financial stocks lower.

The concerns are straightforward: squeezed margins, banks pulling back on lending, and unintended consequences for credit access, particularly for borrowers who already face higher risk profiles. When you cap the price of credit without addressing the underlying risk, lenders don't just eat the loss—they stop lending. That's the worry rattling the sector right now.