Preface
This week's market information reflects attention and expectations regarding Trump's policies and Federal Reserve decisions.
| Warsh was one of the decision-makers during the 2008 financial crisis, involved in formulating policies to respond to the crisis, including significant quantitative easing (QE) and market stabilization measures. He has a special focus on the operation of financial markets at the Federal Reserve and has been seen as a 'market expert' within the Federal Reserve by strengthening its ties with Wall Street to help address liquidity issues.
The global market once again experienced the phenomenon of 'everything is rising' on Friday.
The US dollar index broke upward, with gold, crude oil, and Bitcoin all closing near weekly highs, and the US stock market also rose across the board.
These markets are not driven by a single theme; each market is influenced by specific factors: the dollar, due to a significant increase in expectations for the European Central Bank to cut interest rates; gold and oil, due to the escalation of the Russia-Ukraine conflict; Bitcoin, because of Trump.
Only the rise of the US stock market is somewhat special: influenced by a rumor. According to the Wall Street Journal, Trump is considering nominating former Federal Reserve Governor Warsh (Kevin Warsh) as Treasury Secretary, and when Powell's term as Federal Reserve Chairman ends in 2026, nominating Warsh as Federal Reserve Chairman.
This is a bombshell news that instantly settles the two most closely watched positions in the market - it is simply an unprecedented idea.
First, Warsh has always 'criticized trade protectionism,' and nominating Warsh as Treasury Secretary could send a friendly signal to the market. In this week's meeting, Trump inquired about Warsh's past stance on tariffs, but we do not know how he responded.
Second, looking at Warsh's resume, he is fully qualified to serve as Federal Reserve Chairman. After graduating, he joined Morgan Stanley and became the youngest governor in Federal Reserve history at the age of 36. Trump even considered appointing Warsh as Federal Reserve Chairman during his first presidential term, but only chose Powell after being persuaded by then Treasury Secretary Mnuchin. Trump has publicly expressed regret over this choice. Warsh focused on financial markets at the Federal Reserve, maintaining close ties with Wall Street and global financial institutions, which is exactly what Trump wants. By nominating Warsh as Treasury Secretary while hinting he could become the next Federal Reserve Chairman, this will greatly weaken Powell's influence in financial markets. Thus, there is no need to risk dismissing Powell.
However, Trump's aides often remind that he can easily change his mind and may nominate someone else as US Treasury Secretary. There are four other candidates on Trump's shortlist, which we analyzed in (Global Market Strategy).
During Trump's first term, the nomination for Treasury Secretary was in the last week of November, so it may be that next week is the moment of truth. Because investors are too focused on this event, its impact could rival that of the Federal Reserve's interest rate decision.
Waiting for the storm.
