A report by Ilan Benhamou of JP Morgan's equity derivatives sales team raises questions about the Federal Reserve's independence, labeling it a 'myth.' Benhamou argues that bets on rate cuts will fuel a continued stock market surge, despite potential political pressures.
Benhamou points to the 1965 clash between President Lyndon Johnson and Fed Chairman Bill Martin as a historical example of political interference in monetary policy. He sees parallels in the current situation, suggesting that political pressure on the Fed could influence its interest rate decisions.
Benhamou advises investors to go long on the S&P 500 and the Volatility Index (VIX). This double-down bet is based on the belief that investors will pour more money into risk assets like cryptocurrencies and artificial intelligence, and that volatility will increase due to tariffs, inflation, and Fed-related uncertainty.
While some analysts warn that firing the current Fed chair could disrupt financial markets and trigger a serious legal standoff, Benhamou believes the market will soon begin pricing in the policies of the next chair, potentially leading to a 'race to dovishness' among potential candidates.
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