CWS Market Review – January 13, 2026

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The Fed War: Trump vs. Powell

On Sunday evening, Jerome Powell released a remarkable video message. In it, he said that the Justice Department has served the Federal Reserve with grand jury subpoenas related to Powell’s testimony before the Senate regarding renovation efforts for the Fed’s office buildings.

Powell made it clear that the issue wasn’t really about the office buildings. Instead, this was to put pressure on the Fed to lower interest rates. Powell said he would fight to maintain the Fed’s independence. President Trump said he wasn’t aware of the subpoena. On Monday, gold soared to a new all-time high.

Let me add some explanation. For several years, the Fed has planned to renovate its office budlings. The buildings are close to 100 years old. Like with many things the government does, the project has run far over budget. It was originally supposed to cost $1.9 billion but that’s risen to $2.5 billion.

Last year, Powell explained that there are many reasons for the higher costs. Ironically, inflation is one issue and tariffs are another. The buildings also need to get up to modern standards regarding things like asbestos and lead, plus replacing antiquated mechanical systems.

Some of the plans called for rather opulent features like a roof garden, VIP dining rooms, excess marble and private elevators. Powell went before the Senate and said those features were either misrepresented or are no longer part of the building’s plans. The problem is that the plans Powell referenced deviate from the plans approved by the National Capital Planning Commission. As such, that would require an immediate halt to all construction.

I think DOJ’s plan is to trap Powell in either direction. Did he lie before Congress, or did he violate what was approved by the NCPC?

I’m certainly no lawyer, but that doesn’t sound like criminal behavior. Going by yesterday’s activity on social media, there seems to be a belief that Powell has been arrested for criminal fraud. That’s not the issue. Nor is it the buildings. It’s about his testimony.

Bear in mind that Powell’s term at the Fed ends in May. Technically, I’m referring to Powell’s term as Fed chair. He has a separate term as a Fed board member that goes on until 2028, but Fed chairs rarely stick around after their chairmanship ends. I’ve seen some speculation that Powell will stay on, but I doubt it.

In his video message, Powell said, “This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation.”

Many are taking Powell’s side. Senator Thom Tillis, a Republican from North Carolina, who also sits on the Senate Banking Committee, said he will oppose any nominee until this matter “is fully resolved.” Tillis could bottle up any nominee in committee.

The last few Fed chairs released a statement condemning the DOJ’s action. The statement said that the move “has no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success.” The statement was signed by former Fed Chairs Ben Bernanke, Janet Yellen and Alan Greenspan, and by previous Treasury Secretaries Henry Paulson, Timothy Geithner, Robert Rubin and Jacob Lew.

What to make of this? Frankly, I don’t see this issue going anywhere, although I think there’s a good case for lowering interest rates. The Fed may cut rates a few more times this year. Battles between presidents and the Fed are nothing new. Lyndon Johnson heavily pressured William McChesney Martin to keep rates low during the Vietnam War. Andrew Jackson hated the Second Bank of the United States and did everything he could to get rid of it. (He won.) The Trump versus Powell standoff will make some headlines, but I don’t expect anything to happen.

The Economy Created 50,000 Jobs Last Month

On Friday, the Bureau of Labor Statistics said that the U.S. economy created 50,000 net new jobs last month. That was below Wall Street’s forecast for a gain of 73,000. The figure for November was revised downward to 56,000.

The unemployment rate fell to 4.4% which was 0.1% less than expected. The broader U-6 rate fell to 8.4%. The labor force participation rate fell to 62.4%. The government now says that the economy lost 173,000 jobs in October. The previous report said it was a loss of 105,000.

Restaurant and bar jobs led the month, rising 27,000, while health care added 21,000 and social assistance increased by 17,000. Retail reported a decline of 25,000. Government added just 2,000 jobs for the month.

Average hourly earnings increased by 0.3%. That matched Wall Street’s forecast. Over the last year, average hourly earnings rose by 3.8%. Last year’s jobs gain of 584,000 was the worst year outside of a recession since 2003.

On January 22, we’ll get our first report on Q4 GDP. Some folks on Wall Street expect a very strong report. The Atlanta Fed’s GDPNow model sees Q4 GDP growth of 5.1% which would be very good.

Inflation Was Calm Last Month

On Thursday, the BLS said that inflation in December was slightly less than expected. For the month, headline inflation increased by 0.3%. That put the annual rate at 2.7%.

Core inflation, which doesn’t count food or energy prices, increased by 0.1% last month. That was 0.1% better than expected. Over the last year, core inflation increased by 2.6%. Shelter costs make up one-third of the CPI. Last month, shelter costs rose by 0.4%.

Food prices jumped 0.7% for the month, though egg prices tumbled 8.2% and fell nearly 21% from a year ago after soaring previously. Other areas seeing increases included recreation, airfares and medical care.

Energy prices rose 0.3% on the month and were up 2.3% from a year ago, though gasoline declined 0.5% and 3.4%, respectively.

Recreation prices increased by 1.2%. That’s the largest monthly increase for that category in over 30 years.

The Federal Reserve meets again in two weeks, and it looks like the Fed won’t make any changes to interest rates. In fact, the odds are against the Fed making any move at the meetings in March or April. Traders don’t see the Fed cutting rates until the June meeting, after Mr. Powell has left.

It’s still very early but I’m pleased to see some of our Buy List perform well in 2026. Of the eight trading days so far this year, the Buy List has outperformed the S&P 500 seven times.

Comfort Systems USA (FIX) is already a 15% winner for us this year. The shares just hit another new all-time high. SAIC (SAIC) is up more than 12% so far.

That’s all for now. This week is the start of earnings season but things won’t really get going until next week. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on January 13th, 2026 at 7:50 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.