Political Risk and Market Volatility in the U.S. Equity Sector: The Impact of DOJ Investigations into Trump-Aligned Figures

The U.S. equity market has long been a barometer for political risk, but the interplay between Department of Justice (DOJ) investigations into Trump-aligned figures and investor sentiment has introduced a new layer of complexity in 2024–2025. As the Trump administration refocuses the DOJ on politically charged priorities—ranging from antitrust enforcement to immigration crackdowns—investors are recalibrating their strategies to navigate heightened uncertainty. This analysis explores how these investigations, coupled with the administration's enforcement agenda, are reshaping sectoral performance and amplifying market volatility.

DOJ Investigations and the Shadow of Politicization

The Trump-led DOJ has become a focal point of political risk, with investigations targeting both perceived adversaries and allies. For instance, the DOJ's scrutiny of George Soros' Open Society Foundations, prompted by Trump's public rhetoric, has raised concerns about the weaponization of federal resources for partisan purposesTracking Retaliatory Use of Arrests, Prosecutions, and…^[1]. Similarly, the administration's pursuit of figures like Lisa Cook and Adam Schiff—alleged for “politically motivated actions”—has fueled perceptions of a retaliatory enforcement apparatusTrump DOJ shake-up sidelines top prosecutors in key US attorney offices^[2]. These actions, combined with the restructuring of the DOJ to favor politically aligned appointees, have eroded institutional trust, creating a climate where legal risks are no longer confined to corporate misconduct but extend to political alignmentHow the DOJ under Trump is targeting his perceived political adversaries^[3].

The implications for investors are profound. Sectors such as healthcare and technology, which face heightened DOJ scrutiny under Trump's agenda, are experiencing divergent responses. For example, the DOJ's renewed focus on antitrust enforcement—evidenced by its ongoing case against Google—has led to sharp stock price corrections in Big Tech, with Alphabet's shares dropping 8% following a June 2025 filingStocks get crushed but we were buying. Google hears from Trump DOJ^[4]. Conversely, energy and industrials have benefited from deregulatory policies and infrastructure spending, with the S&P 500 Energy Index rising 12% year-to-dateImpact of Trump on Stock Market: US Equity Outlook & Sector…^[5].

Market Volatility and the Tariff Factor

Trump's trade policies have further amplified market volatility. The abrupt imposition and subsequent 90-day pause on tariffs in April 2025 triggered a rollercoaster for equities. The S&P 500 surged 9% in a single day following the tariff reversal, while the Magnificent Seven lost $2 trillion in value during the initial announcement phaseWhy some are accusing Trump of manipulating stock markets^[6]. This volatility underscores the market's sensitivity to policy shifts, with investors increasingly hedging against regulatory uncertainty.

The DOJ's role in enforcing trade-related False Claims Act (FCA) violations has added another dimension. With the DOJ recovering $3 billion in 2024 through FCA settlements—such as the $12.4 million case against Allied Stone Inc.—companies in import-heavy sectors are under pressure to bolster compliance frameworksFalse Claims Act usage continues to rise in US tariff enforcement^[7]. This has led to a surge in qui tam lawsuits, with 979 filed in FY2024 alone, creating a dual risk of civil and criminal penalties for firms misrepresenting tariff complianceTrump’s DOJ & the False Claims Act: What’s Next?^[8].

Sectoral Performance and Strategic Adjustments

The DOJ's enforcement priorities are reshaping sectoral dynamics. In healthcare, the administration's focus on Medicare/Medicaid fraud has stabilized enforcement levels, but the elimination of DEI policies in federal contracts has introduced new FCA risks for providersRecalibrating Compliance Programs Under Trump 2.0^[9]. Meanwhile, the energy sector has thrived under pro-fossil fuel policies, with E&P stocks outperforming the broader market by 15% in 2025Trump’s trade policy and enforcement implications under the False Claims Act^[10].

Technology, however, faces a bifurcated outlook. While the DOJ's antitrust actions have curbed Big Tech's dominance, the administration's pivot to traditional securities fraud enforcement has reduced regulatory headwinds for smaller tech firmsThe second Trump Administration’s first 100 days | DLA Piper^[11]. This duality is reflected in the Nasdaq Composite's 5% underperformance relative to the S&P 500 in Q3 2025Stock market under the Trump administration - U.S. Bank^[12].

Conclusion: Navigating a Polarized Enforcement Landscape

As the Trump administration continues to redefine the DOJ's role, investors must balance sector-specific risks with broader political uncertainties. The key takeaway is that enforcement actions are no longer predictable or neutral; they are increasingly tied to the administration's political agenda. For investors, this means prioritizing sectors with clear policy tailwinds (e.g., energy) while hedging against regulatory overreach in others (e.g., tech, healthcare).