January 13, 2026

US Stocks Hit New Highs Amid Federal Reserve Probe and New Policy Threats

The Market Mic Drop

"US markets are hitting records despite a politically charged Fed investigation and new tariff threats, while the cryptocurrency sector faces increased regulatory scrutiny in both the UK and US."

Investor Action

The ongoing political uncertainty surrounding the Federal Reserve continues to support safe-haven assets like gold, which may be considered for portfolio diversification. Investors in the banking sector should monitor developments regarding the proposed credit card rate cap, which could impact profitability. The new tariff threats add another layer of risk to companies with significant exposure to US-China trade. For those with exposure to digital assets, the increasing regulatory scrutiny in both the UK and US suggests a cautious approach is warranted, as future legislation could significantly alter the market landscape.

Market Snapshot

📈 S&P 500: 6,977 (+0.16%)
📈 Dow Jones Industrial Average: 49,590 (+0.17%)
📈 NASDAQ Composite: 23,734 (+0.26%)
📉 FTSE 100: £10,133 (-0.17%)
📈 Bitcoin (BTC): $91,869 (+0.76%)
📈 Ethereum (ETH): $3,131 (+1.28%)
📈 XRP: $2.06 (+0.28%)

Political Pressure Mounts on US Federal Reserve

US markets have shown resilience, with the S&P 500 and Dow Jones Industrial Average closing at record highs after an initial dip, even as political tensions surrounding the US central bank escalate. The Department of Justice (DOJ) has launched a criminal investigation into Federal Reserve Chair Jerome Powell, serving him with grand jury subpoenas.

The official focus of the probe is cost overruns related to the renovation of the Federal Reserve's headquarters. However, Mr. Powell has publicly described the investigation as a "pretext" to pressure the central bank into accelerating interest rate cuts. This move has drawn widespread, bipartisan criticism from former Fed chairs and senior economists, who view it as a challenge to the central bank's independence.

Political and Market Fallout

The investigation has caused concern in the US Senate. Republican Senator Thom Tillis has stated he will block any new Fed chair nominees until the legal matter is resolved, a stance supported by Senator Lisa Murkowski. This complicates the transition to a successor, as Powell's term as chair ends in May, although his term as a board governor continues until 2028.

Despite the political upheaval, some market strategists suggest investors are focused on a healthy economy and strong earnings. However, the situation has created an undercurrent of concern. In response to the uncertainty, gold and silver prices surged to all-time highs as investors sought safe-haven assets. The US dollar and Treasuries weakened as some investors diversified away from US assets.

Administration Signals Major Policy Shifts

Beyond the pressure on the Federal Reserve, the US administration has signalled significant new policies that are causing ripples across the financial and trade sectors.

Credit Card Rate Cap Proposal

President Trump has called for a one-year, 10% interest rate cap on credit cards, set to begin in January 2026. The proposal immediately impacted banking stocks. High-rate issuers like Synchrony and Capital One saw their shares fall by over 10%, while American Express also declined. In contrast, 'buy-now-pay-later' firms like Affirm saw their stock rise as investors anticipated a shift to alternative credit.

Banks have warned that such a cap could alter consumer lending, potentially leading them to tighten standards for subprime borrowers. While analysts at Jefferies view the proposal as "highly unlikely" to become law, they note that it "opens the debate" about pricing in the sector.

Renewed Trade Tensions

The administration also announced an "effective immediately" 25% tariff on any country conducting business with Iran. The threat, made on social media, is seen as an attempt to exert pressure on Tehran following anti-government protests. It is widely interpreted as being aimed at China, the largest buyer of Iranian oil.

The announcement lacked formal documentation, creating uncertainty. If applied on top of existing tariffs, it could severely disrupt US-China trade. The policy's legality is also in question, with a Supreme Court ruling expected on whether the president can implement such tariffs without congressional approval.

Shifting Global Investment Flows

There is a notable shift in global capital allocation. The US is now attracting 20% of all foreign direct investment (FDI), as the administration works to bring capital back home. Simultaneously, China's outbound investment reached 10% of the global total in the first half of 2025, surpassing US overseas spending for the first time.

This role reversal sees China increasingly funding infrastructure and factories abroad, using its large trade surplus to finance this expansion rather than purchasing US Treasuries. This creates a complex economic landscape for nations navigating relationships with both economic superpowers.

Sector and Corporate Highlights

Energy Sector Developments

AI's Impact on Power Grids

America's largest power grid operator, PJM Interconnection, faces a reliability crisis due to the electricity consumption of AI data centres. This demand is straining supply and pushing up electricity prices. The situation has been complicated by President Trump, who stated that technology companies must “pay their own way” for rising electricity needs, introducing a new political risk for the sector.

This could mean AI companies funding a significant portion of the projected $1 trillion in required utility investments. In response, major technology companies like Meta are exploring ways to source their own power, including partnerships with nuclear providers.

Venezuela's Oil Sector Post-Maduro

Following the capture of Nicolás Maduro, the White House proposed a plan to rebuild Venezuela's oil sector. However, ExxonMobil's CEO labelled the country "uninvestable" without significant legal protections, citing past expropriation of assets. This contrasts with Chevron, which is better positioned with existing infrastructure and has pledged to increase production. In response to the political changes, Venezuela's stock market has rallied over 130%.

Corporate and Technology News

Alphabet Hits $4 Trillion: Google's parent company, Alphabet, saw its market valuation cross the $4 trillion mark. The surge followed confirmation that Apple will use Google's Gemini AI to power a new version of Siri. The deal reinforces Google's strong position in the AI race and adds to its lucrative existing arrangement as the default search engine on Apple devices.
JPMorgan Chase Beats Expectations: The bank reported fourth-quarter results that surpassed analyst estimates for both revenue and profit, driven by stronger-than-forecasted trading revenue. Shares rose in premarket trading on the news.
Meta Hires Former Diplomat for AI Push: Meta Platforms has appointed Dina Powell McCormick, a Wall Street veteran and former Trump administration official, to help manage its massive spending on AI infrastructure. The company spent about $70 billion on data centres last year and is securing long-term energy deals, including from nuclear power plants.
Paramount Launches Proxy Fight for Warner Bros.: Paramount Skydance is escalating its hostile bid for Warner Bros. Discovery. It plans to nominate its own directors to Warner's board to persuade shareholders to reject a rival takeover offer from Netflix.
Delta Air Lines Projects Profit Jump: The airline's fourth-quarter revenue was slightly below expectations, but it beat earnings forecasts and projected a 20% profit increase for 2026, citing strong leisure and business travel demand.
Airbus Deliveries Rise: The European planemaker delivered 793 aircraft in 2025, a 4% increase, beating its revised target despite supply-chain issues and staying ahead of rival Boeing.
United Health Care Investigation: Shares in United Health Care slipped following a Senate report alleging the company manipulated the Medicare billing system to receive higher government payments.
European Defence Stocks: A mix of EU and national funding has fuelled a surge in European defence stocks, with investors identifying it as a long-term "mega-trend".
Dubai Bans Privacy Tokens: Dubai's financial regulator has banned the use of privacy-focused cryptocurrencies, stating they fail to meet anti-money laundering and financial crime prevention standards.
Moderna Forecasts Sales of $1.9B: The vaccine maker projects sales of $1.9 billion for 2025, far below its pandemic peak but near the top end of its forecast, as it cuts operating expenses.
Duolingo CFO to Step Down: The language-learning company's CFO, who oversaw its public listing, will step down in February as the company shifts its focus towards improving teaching quality.

Cryptocurrency Market Developments

The digital asset space is experiencing a period of intense activity, marked by new regulatory proposals, technological innovations, and evolving market dynamics.

Regulatory and Political Landscape

UK MPs Push for Crypto Donations Ban

A group of seven senior Labour MPs are urging the UK government to ban political donations made via cryptocurrency. They argue in the forthcoming Elections Bill that digital assets could enable foreign interference and pose challenges to electoral integrity. The pressure follows the revelation that the Reform UK party accepted a £9 million crypto donation. However, government sources have suggested a ban is unlikely to be included due to implementation complexities.

US CFTC Forms Innovation Committee

In the United States, the new chair of the Commodity Futures Trading Commission (CFTC), Michael Selig, has launched an Innovation Advisory Committee. This signals a more proactive regulatory stance, expanding the agency's focus on crypto, artificial intelligence, and prediction markets. The committee includes leaders from prominent industry firms, and its formation comes as Congress debates legislation that could broaden the CFTC's authority over digital assets.

DeFi Growth and Stablecoin Debate

Market Growth and Headwinds

The total value locked (TVL) in Decentralised Finance (DeFi) reached a new all-time high of $225 billion in October, though the rate of growth has slowed compared to 2021. The stablecoin market has grown to over $260 billion, with a notable increase in yield-bearing stablecoins, of which 88 were launched in 2025 alone.

Stablecoin Risk Assessment

Concerns have been raised by over 100 community bankers in the US, who warned senators that yield-bearing stablecoins could draw as much as $6.6 trillion in deposits away from traditional banks, potentially harming local lending. However, JPMorgan has dismissed these concerns as overstated, signalling confidence that the sector poses a manageable competitive risk. In a sign of shifting market share, Solana's stablecoin supply recently fell by nearly 10% in one week, allowing the Binance Smart Chain (BSC) to overtake it in market capitalisation.

Ethereum Network Activity

Activity on the Ethereum network is increasing, with key applications showing sharp growth in transactions and network throughput hitting new highs. Demand for staking Ether also appears to be re-accelerating, as the queue of validators waiting to exit the network has dropped to zero, while a significant amount of ETH is in the queue waiting to be staked.

Platform and Infrastructure News

X Introduces 'Smart Cashtags': The social media platform X (formerly Twitter) is testing a feature that displays near real-time on-chain prices for cryptocurrencies when they are tagged in posts. The system aims to reduce confusion between similarly named tokens and may integrate trading functionality in the future.
Polygon's 'Open Money Stack': Polygon Labs has detailed its vision for an infrastructure framework designed to move global financial transactions on-chain. The system aims to enable instant cross-border settlement and improve interoperability between different blockchain networks.

NOTE: This content is for informational and educational purposes only and does not constitute financial advice. Always do your own research. Not financial advice (NFA).