Some of Trump's allies are shocked by the subpoena of Powell, which may trigger Wall Street to hedge risks.

On January 12, according to sources familiar with the matter, some of Trump’s allies were shocked by the Trump administration’s decision to subpoena Powell, fearing that legal battles against Federal Reserve Chair Powell would disrupt the bond market. They are also concerned that this could make Powell reluctant to leave the Fed after his term ends in May. Powell can remain as a Federal Reserve Board member until 2028, and it has not been specified whether he plans to follow the traditional exit from the Fed. It is reported that Trump’s aides and allies are evaluating the consequences of actions against Powell and their potential unintended impacts. Among the concerns is how Wall Street will react after the market opens on Monday — the bond market is likely to see this as a threat to the Fed’s independence. This also introduces uncertainty into Trump’s efforts to replace Powell with new leadership. Evercore ISI analysts stated in a report that they are “shocked by this deeply unsettling development, which threatens the independence of the central bank. This is undoubtedly a flight-to-safety move. We expect the US dollar, bonds, and stocks to decline in Monday’s US trading, similar to the peak of tariff shocks in April last year.” (Jin10)