Trump finally makes his Fed chair pick — what Kevin Warsh means for investors
Financial markets took President Donald Trump ‘s pick of Kevin Warsh as the next Federal Reserve chair largely in stride, a sign investors see the former Fed governor as a credible steward of monetary policy despite expectations he may push for lower rates. Treasury yields were little changed on Friday immediately following the announcement, a sign investors saw little risk to inflation or the Fed’s independence. The dollar edged higher against major peers, while losses in stocks were contained , suggesting relief that Trump’s pick was viewed as a steady hand rather than a political pawn. Gold and silver prices plunged as Warsh was seen as helping ease the concerns about U.S. currency “debasement” that have driven international investors into the metals. “I believe he brings a strong mix of deep expertise, broad experience, and sharp communication skills,” Mohamed El-Erian, chief economic advisor at Allianz, said in a post on X. “His commitment to reforming and modernizing the Fed bodes well for enhancing policy effectiveness and protecting the institution’s political independence.” Warsh’s nomination is widely seen as removing the cloud over Fed independence that had been weighing on stocks and threatening to drive interest rates higher. With that risk receding, investors can refocus on corporate earnings and economic fundamentals rather than political interference at the central bank. Warsh, who served at the central bank from 2006 to 2011, was openly critical of quantitative easing during and after the financial crisis, a stance that has bolstered his standing with investors wary of inflation and fiscal dominance. “I think Kevin Warsh will be a great pick for Fed Chair. As I’ve been a long time critic of the Fed’s easy money policy both with rates and their balance sheet, I always appreciated Warsh’s hawkishness and disdain for QE,” Peter Boockvar, chief investment officer at OnePoint BFG Wealth Partners, said in a note. Since Jerome Powell was confirmed in 2018 during Trump’s first term, the president has repeatedly pressured the Fed to cut interest rates more aggressively. Even after three rate reductions late in 2025, Trump continued to push for easier policy, while also criticizing Powell over cost overruns tied to the central bank’s headquarters renovation in Washington. “While he had been somewhat critical of Jerome Powell for being too late to cut rates, he should understand the importance of the independence of the Fed,” said Jay Woods, chief market strategist at Freedom Capital Markets. “Tying in with that independence theme will be questions about his views and how they align with the more aggressive views of President Trump when it comes to any rate cuts.” Still, not everyone is convinced the calm in the markets will last. Chris Rupkey, chief economist at Fwdbonds, cautioned that markets may be underestimating how closely Warsh could ultimately align with the White House. “Slowly but surely he will lean in the President’s direction which favors dramatic interest rate cuts of at least one or two percentage points below 3% neutral,” Rupkey said in a note. “Warsh wouldn’t have gotten the job unless he had given the President his word that he would follow the Trump 2.0 economic agenda.” @GC.1 1Y mountain Gold futures one year For precious metals, the shift raises the prospect that the crowded trade may finally be losing air. Silver futures plummeted 31.4% to settle at $78.53, marking its worst day since March 1980. Gold futures dropped 11.4% to settle at $4,745.10. “The Warsh pick should help stabilize the dollar some and reduce (though not eliminate) the asymmetric risk of deep extended dollar weakness by challenging debasement trades – which is also why gold and silver are sharply lower,” Krishna Guha, vice chairman at Evercore ISI, said in a note.
Post Comment