Fed Drama Heralds an Eventful 2026

I have a distinct memory from my time as a high school student. It was my first Econ class — I think I was a junior. I had never taken an Econ class before, wasn't even sure what the subject was, but it was something new, so I was interested.

It may have been the first class — certainly early in the semester — when the teacher asked, "What happens to the price of things over time?" I raised my hand: "Things get cheaper over time." The teacher smiled and asked a follow-up: "Why do you think prices on goods go down?" I responded, "Because as more people buy something, the companies that make it get better at making it and prices go down." The answer seemed logical. It was, of course, not correct. Hence began the lesson on inflation.

While the powers that be have evolved and changed over the centuries, one trend has persisted: whoever holds power in any given economic or political system tends to seek control over the monetary system — and once that control is established, it has historically been mismanaged, sometimes to the point of systemic collapse. The history of this phenomenon, outlined well in the book "Insidious" by Orrin Woodward, is well documented. Governments, whether warlords, monarchs, ruling councils, or democratically elected politicians, seek to control the system of money. Once control is established, the agendas of governments — whether expanding empire or expanding social welfare — are rarely patient enough to be inherently sustainable, and individuals within those societies pay the price through inflation.

When our own nation was formed, the founders were aware of this history. Despite founding a government based on precepts of individual liberty, early political leaders also sought control over currency and monetary policy. The process of centralizing monetary control in the new Federal government is the story behind the music and performances in the play "Hamilton." Control over money is inherent to government itself.

"Hamilton" details the political drama behind the formation of the first central bank in the United States. Our modern Federal Reserve Bank is the nation's third iteration of this concept. In the creation of the "Fed," implemented in 1913 during a period of progressive political evolution, the government took a new approach — looking to experts to manage the currency and monetary system, acting independently of politicians based on economic academic theory, in the public's best interest.

While previous attempts at creating a central or national bank persisted only about 20 years each, the system of the Fed has proved much more durable. Now over 100 years old, the Fed has assumed a critical role in financial markets and banking. Despite the Heritage Foundation's finding that the U.S. dollar has lost 97% of its purchasing power during the Fed's tenure, the Fed is considered an effective and critical component of modern finance by most academics and investors alike.

Donald Trump, however, does not necessarily agree. When I look at the philosophy of the Trump administration, the most consistent trend I see is an inherent distrust of institutions vested with control over American life — whether academic, bureaucratic, political, or economic. The Fed is no exception.

To be candid, the Federal government does have a serious issue not created solely during Trump's time in office. With a national debt at $38 trillion and a need to refinance or borrow an estimated $11 trillion in 2026, the government needs lower interest rates to save hundreds of billions in interest costs. The Fed controls this lever. In typical Trump fashion, the intention for lower interest rates has not been subtle. This week, the pressure ratcheted up with some high-profile aggressive legal tactics directed at the Fed's Board Chair. In May, the Fed Board charged with interest rate policy is likely to become more directly influenced by the President as Board members turn over. While the future of the Fed itself appears uncertain to me, the future of short-term interest rates does not.

Continued public drama between the President and the Fed has the capacity to spook financial markets, but lower short-term rates will have an impact as well. I don't think 2026 is going to be anything close to boring.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing includes risks, including fluctuating prices and loss of principal. No investment strategy can guarantee a profit or preserve against loss. Past performance is not a guarantee of future results. This material may contain forward looking statements; there are no guarantees that these outcomes will come to pass.

Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at marc.ruiz@oakpartners.com. Securities offered through LPL Financial, member FINRA/SIPC.