It’s a peculiar sight on Wall Street these days. The S&P 500 has climbed a respectable 10% this year, shrugging off concerns that would have sent traders running for the hills in another era. Yet, beneath the surface calm, the currents of risk are getting stronger. Investors have already been digesting historically high tariffs and trillions in projected new debt. But a recent string of actions by the White House, culminating in an unprecedented move against the Federal Reserve, has added a much more fundamental worry to the mix.

Let’s start with the risks we already knew. Trade policy has pushed the average tax on imports to 18.6%, a level we haven’t seen since 1933. Most economists agree on the likely outcome: higher prices for consumers, slower economic growth, and eventually, a hit to corporate earnings. At the same time, recent legislation is on track to add more than $4 trillion to the national debt over the next decade. Tariffs and deficits — it’s a classic cocktail for a market hangover.

But the playbook is now expanding into more troubling territory: direct interference with the independent institutions that provide the data and stability our markets rely on. We saw the head of the Bureau of Labor Statistics dismissed after a few months of disappointing jobs numbers, followed by baseless claims that the data was rigged. 

We’ve also seen the lines between the public and private sectors blur in unusual ways, such as the government negotiating a revenue-sharing deal with Nvidia and taking a 10% ownership stake in Intel. These moves suggest a willingness to play favorites in key industries, creating an unpredictable landscape for investors.

This pattern of interference has now arrived at the front door of the most critical institution of all: the Federal Reserve. It’s no secret the administration wants lower interest rates to offset the economic drag from its trade policies. After months of public insults aimed at the Fed Chair, the White House has now taken the unprecedented step of firing a Federal Reserve Governor, Lisa Cook.

The official reason given — a paperwork discrepancy on mortgage applications from years ago — is viewed by many as a thin pretext to remove a dissenting voice and exert more control over monetary policy.

So why should a boardroom drama at the Fed send a shiver down the spine of a stock investor? Because the Fed’s independence is a cornerstone of the U.S. economy’s credibility. Investors, particularly those who buy U.S. Treasury bonds, trust that the Fed will act as a non-political steward, prioritizing long-term stability over short-term political wins.

If that trust erodes, everything changes. Bond investors would begin to question the safety of U.S. debt and demand higher yields to compensate for the new political risk. And as we know, when the yields on “risk-free” government bonds go up, stocks suddenly look a lot less attractive. The result, as one JPMorgan strategist warned, could be a rush out of the U.S. dollar, a spike in interest rates, and a significant selloff in the stock market.

For now, the market is choosing to look the other way. But it’s walking a tightrope, and the foundation is being deliberately shaken. The question is no longer just about tariffs or deficits, but whether the very rules of the game are being rewritten while we play.