06 Jan 2025 – 13 Jan 2026

Powell Under Siege

This week marks an unprecedented assault on the Federal Reserve.

The Fed Chair faces a DoJ criminal investigation into the headquarters renovation. Markets shrugged it off initially, with the S&P posting fresh all-time highs. But the challenge to the independence of the Fed is real. Powell’s term ends in May, and Trump wants rate cuts now. The “Trump-Powell Standoff” has introduced a level of political risk that current volatility (VIX at 15) is simply not pricing in.

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Equities: Breaking Through on Fumes

The S&P 500 cleared the 7,000 milestone and touched new highs despite weak volume and heavy political noise. The catalyst? A December NFP miss (50k vs 73k expected) that gave markets the “bad news is good news” signal they wanted: a green light for earlier Fed cuts without immediate recession fears.

The Russell 2000 also hit a fresh record. Small caps joining the party improves breadth. But participation is still thin. Monday’s 500-point Dow swing shows how fragile this is. Financials are already on high alert after the administration floated a 10% cap on credit card interest rates, sending shockwaves through lenders like Citi (-3%).

Bank earnings this week will determine if this sticks. If JPMorgan or Goldman guidance disappoints, this breakout becomes a classic bull trap.

Bitcoin: The $90k Base

Bitcoin held $90k all week after testing lows near $88k. That’s the floor that matters. The Powell conflict initially sparked a brief spike above $92k as institutional players positioned for Fed uncertainty, but momentum stalled.

MicroStrategy remains the primary engine of this consolidation, adding another 13,627 BTC for $1.25 billion this week. Their total holdings are now above $62 billion, accounting for over 3% of the total supply. This level of institutional accumulation suggests that while the “retail” momentum has cooled, the structural floor is being reinforced by deep pockets.

The setup remains constructive if $90k holds. If we break $95k cleanly, the next leg of the bull run unfolds. However, if the market loses $88k on a daily close, expect a swift revisit to the low $80s as late-longs get liquidated. Until then, the price is just oscillating within the “Standoff” range.

Volatility: Still Too Quiet

VIX at 15 reflects a market that doesn’t believe the Powell situation matters. Despite the headlines, option premiums remain compressed to the point where covered call strategies are barely generating enough income to justify the capital risk.

With CPI data on deck for Tuesday and Bank Earnings following, we are approaching the expiration date of this calm. Income strategies should remain on the sidelines; wait for the VIX to reclaim 18-20 before looking for entry points in premium selling.

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The Week Ahead

Tuesday: CPI data drops at 8:30 AM. Consensus expects 0.3% monthly, 2.7% annually. Any upside surprise kills the June rate cut narrative. The Fed has signaled a pause until late spring, but inflation determines the path.

Bank earnings: Results from the major money centers will show how higher rates affected Q4 performance. Guidance on loan growth and net interest margins will set the tone for financials.

Political noise: The Trump-Powell conflict isn’t going away. If the investigation escalates or Powell pushes back harder, expect volatility.

Markets are pricing perfection at all-time highs. CPI and earnings will test that assumption.

Let the data speak first.