Wall Street sounded the alarm: Concerns about the independence of the Federal Reserve intensify, and inflation trading reignites.

Wall Street strategists say there are signs that investors' concerns about the independence of the Federal Reserve are growing as President Donald Trump attempts to influence the Fed and push for rate cuts. The Morgan Stanley team states that the positioning in the stock, bond, and gold markets indicates that investors are preparing for potential inflation increases after Trump appointed close advisor Stephen Moore to the Fed and attempted to dismiss board member Lael Brainard. Morgan Stanley strategist Nikolaos Panigirtzoglou said, "Our indicators show that concerns about the independence of the Fed are increasing, as signs of a 'Fed inflation trade' emerge." Goldman Sachs analyst Samantha Dart said that growing concerns about the credibility of American institutions are causing "major tail risks" that could lead to spikes in commodity prices, including gold. Goldman's report outlined various possible scenarios for gold prices, with the baseline prediction being that gold prices will soar to $4,000 per ounce by mid-2026; reaching $4,500 in a tail risk scenario; and nearing $5,000 if 1% of privately held US Treasuries are converted to gold. As pressure on the Federal Reserve mounts, inflation-sensitive assets are rising. With President Trump openly calling for lower borrowing costs, financial markets are increasingly betting on Fed rate cuts. Since Fed Chairman Jerome Powell made dovish comments at the Jackson Hole Economic Symposium in August, derivative traders have largely priced in expectations for a rate cut in September. Morgan Stanley strategists say investors' concerns about the Fed's independence are reflected in the performance of value stocks. Value stocks are closely tied to the economic cycle and tend to perform better when there is greater price pressure. Commodity prices have also risen, while the yield curve on 5-year and 30-year US Treasuries has steepened in the past month. The foreign exchange market, however, remains optimistic.