Picton Investments has warned that financial markets would react swiftly if political pressure were seen to undermine the independence of the US Federal Reserve, with bond investors likely to respond negatively to any perception of policy interference, according to a report by Bloomberg.
David Picton, chief executive of the Canadian hedge fund firm, said markets would quickly “discipline” the US if President Donald Trump were to appoint a Federal Reserve chair viewed as overly compliant with the White House.
“If a new Fed chair was imposed that bowed to the will of the president, the market would punish that extremely quickly,” Picton said, pointing to the risk of rising bond yields and renewed volatility.
Picton said recent rallies in gold and silver reflect growing investor concern over political risk, particularly following renewed public attacks on current Fed chair Jerome Powell. He noted that precious metals have increasingly acted as a hedge during periods of heightened political uncertainty.
“There is a clear relationship between political noise and what’s happening in the debasement trade – gold, silver and commodity-based hedges,” he said.
Precious metals strengthened earlier this month amid escalating tensions between the White House and the Federal Reserve, as well as renewed trade rhetoric involving Europe. The developments have reinforced so-called “Sell America” sentiment among some investors, Picton added.
Despite the tensions, Picton said he does not ultimately expect the Federal Reserve to lose its independence, although continued public criticism of policymakers risks unsettling markets.
Looking ahead, the firm sees scope for stronger global growth in 2026, supported by fiscal stimulus and increased government spending across major economies, including infrastructure and defence investment.
Picton expects this environment to encourage a broadening of equity market performance beyond large-cap technology stocks, with potential capital rotation into sectors such as consumer discretionary, transportation and autos. He added that increasing capital discipline within the artificial intelligence sector could further drive differentiation between winners and losers.
While the outlook for equities remains broadly constructive, Picton cautioned that a rise in bond yields – driven by investor concern over expanding government borrowing – could trigger a market correction. As a result, the firm has increased its hedging activity to protect portfolios against potential downside risks.
Picton also remains positive on commodities, citing years of underinvestment combined with structurally rising demand. He highlighted silver in particular, noting its growing importance in electrification and renewable energy supply chains, and said supply constraints could continue to support prices.
