Fed Chair Turmoil and Trump’s DOJ Gambit: Why Risk Markets Are Shrugging Off the Chaos

The script for February was supposed to be simple: new Fed Chair, new regime, new market narrative. Instead, traders are getting a masterclass in political theater, with President Trump publicly calling for the Department of Justice to keep digging into Jerome Powell even as Kevin Warsh’s nomination sends the old guard scrambling for their playbooks. The kicker? Risk assets are rallying, volatility is subdued, and the S&P 500 proxy IWM sits at $262.215 like nothing happened. If you’re waiting for the market to care about the Fed’s existential crisis, you might want to pack a lunch.

Let’s start with the headline grabber: Trump, never one to let a grudge die, is pushing for the DOJ to continue its criminal probe into outgoing Fed Chair Jerome Powell. CNBC reports that the President wants the investigation to go “to the end.” The market, which has a memory shorter than a TikTok loop, barely blinked. Meanwhile, Kevin Warsh’s nomination as the next Fed Chair is generating more hand-wringing among macro strategists than actual price action. Seeking Alpha’s take is that Warsh could be a policy error in the making, removing the so-called ‘Fed put’ and introducing a new era of uncertainty. Yet, as of the close, IWM is flat at $262.215, and the global equity ETF ACWI is equally comatose at $146.3.

If you’re looking for drama, you’ll find it in the headlines, not the tape. The Dow gained 1.1% on the back of a strong U.S. manufacturing report (WSJ), but the real story is the market’s ability to shrug off political chaos and central bank regime change. Gold and silver are getting pummeled, but equities? They’re acting like it’s just another Tuesday. The S&P 500’s small-cap proxy IWM is supposed to be the canary in the coal mine for U.S. risk appetite, yet it’s showing all the urgency of a British queue.

What gives? The market’s collective attention span is being tested by a barrage of macro headlines, but price action refuses to cooperate with the doomers. The last time the Fed was this much in the political crosshairs, volatility shot through the roof. Now, with Warsh’s hawkish reputation and Trump’s DOJ threats, you’d expect at least a tremor. Instead, the VIX is muted, and the only thing moving is the narrative.

The context here is crucial. This isn’t 2018, when Powell’s rookie mistakes sent risk assets into a tailspin. Nor is it 2020, when the Fed’s bazooka kept every asset afloat. Today’s market is more cynical, more algorithmic, and frankly, more bored with political posturing. The fact that equities are holding steady while gold and silver get eviscerated suggests that inflation fears are taking a back seat to liquidity and earnings. The Warsh nomination might remove the ‘Fed put,’ but traders are betting that the real policy error would be to overreact.

There’s also a sense that the market has already priced in a higher-for-longer regime. With U.S. manufacturing data surprising to the upside and no immediate signs of a credit crunch, the risk-on trade is alive and well. The real risk isn’t who sits in the Fed’s big chair, but whether the economic data starts to roll over. Until then, the small-cap index IWM is content to nap at $262.215.

Strykr Watch

Technically, IWM is locked in a tight range, with $260 acting as short-term support and $265 as resistance. Momentum indicators are neutral, with RSI hovering near 50 and no clear trend emerging. The lack of volatility is almost suspicious, given the macro backdrop. If IWM breaks below $260, expect a quick trip to $255, but as long as it holds this level, the path of least resistance is sideways to higher. The 50-day moving average sits just below at $259, providing an additional cushion. Volume is light, suggesting that institutional players are waiting for a catalyst.

The main risk here is that the market is underestimating the potential for a policy shock. If Warsh signals a more aggressive tightening path or if the DOJ probe into Powell escalates into a broader attack on Fed independence, volatility could spike. But for now, the algos are content to ignore the noise.

On the opportunity side, traders looking for a breakout can play the range: long on dips to $260 with a stop at $258, targeting a move to $265. Alternatively, a break above $265 opens the door to a retest of the $270 level. Fade any knee-jerk selloff on political headlines unless it’s accompanied by a real shift in economic data or Fed guidance.

Strykr Take

The market’s message is clear: wake me when something actually happens. The Warsh nomination and Trump’s DOJ theatrics make for great headlines, but they’re not moving the needle for risk assets. Until the data turns or the Fed actually changes course, the smart money is betting on more of the same. Don’t let the noise shake you out of your positions.

Strykr Pulse 65/100. The market is neutral, bordering on bullish, as traders discount political drama and focus on fundamentals. Threat Level 2/5. Asleep at the wheel, but keep an eye on the headlines.