What investors need to pay attention to as momentum fades for the 'Sell America' strategy

Market Recap: "Sell America" Sentiment Fades

• What began as another typical day of "Sell America" trading ultimately lost momentum by the close.
• Despite President Trump's renewed criticism of the Federal Reserve, US stock markets ended the session in positive territory as investors appeared unfazed.
• Below is an overview of key factors for investors to monitor across equities, bonds, and currency markets.

President Trump has recently intensified his influence on the markets, even by his own standards.

Just over a week ago, he sparked a rally in oil shares by urging American energy companies to invest in Venezuela's recovery.

More recently, defense sector volatility increased after Trump first called for an end to buybacks and dividends from defense firms, then reassured markets by promising $1.5 trillion in military funding.

The latest significant market disturbance from the Trump administration began Sunday, following reports that the Justice Department had issued subpoenas to the Federal Reserve regarding Jerome Powell's testimony on renovation projects.

Recent years have shown that markets are sensitive to any perceived threats to the Fed's autonomy. The typical reaction has been the so-called "Sell America" trade, where investors offload US stocks, Treasuries, and the dollar.

While Monday's events didn't trigger the most severe "Sell America" response seen to date, they still raised the stakes for stocks, bonds, and the dollar:

Equities

Monday's Developments

After an initial sharp decline, major US indices recovered to end the day modestly higher. The market's reaction was more subdued compared to previous episodes of Fed-related turmoil.

Some investors may be anticipating a reversal from Trump, or are simply accustomed to Powell maintaining course despite presidential pressure—especially with only four months left in his term.

Key Considerations

JPMorgan Securities advised caution regarding equities following the DOJ's actions. The firm highlighted the increased significance of the Supreme Court's pending decision on whether Trump can dismiss Fed Governor Lisa Cook.

Treasury Bonds

Monday's Developments

The 10-year Treasury yield climbed by up to 4 basis points before retreating, a typical move during "Sell America" trades as investors exit US debt. However, the reaction remained relatively muted.

Key Considerations

With little immediate market movement, attention has shifted to last week's December employment data. This report led JPMorgan's chief US economist to revise his outlook, now predicting no rate cuts in 2026 and a possible hike in 2027.

If the "Sell America" trend continues and markets conclude that the Fed's rate-cutting cycle has ended, yields could rise further.

US Dollar

Monday's Developments

The dollar index, which tracks the greenback against a group of major currencies, dropped as much as 0.5% on Monday. Reducing exposure to the dollar is a central aspect of the "Sell America" strategy.

Key Considerations

The dollar recently ranked as the weakest major currency in 2025. While a softer dollar can benefit exports, it may also signal diminished confidence in the US financial system.