So Trump just picked Kevin Warsh to run the Federal Reserve, and let me tell you, the market had feelings about it. Stocks, gold, and silver all took a nosedive Friday like they just found out their favorite restaurant switched to frozen fries.
Here’s the thing: everyone expected Trump to pick someone who’d slash interest rates faster than a Black Friday shopper grabbing the last TV. But Warsh? This guy’s got a history of being about as dovish as a hawk convention.
1. Warsh Might Pull a Classic Bait-and-Switch
Sure, Warsh suddenly started singing the “lower rates” tune back in November 2024 – which, let’s be honest, looked about as genuine as a politician’s campaign promise. But here’s where it gets spicy: once he’s actually in the big chair, his inner hawk might come roaring back.
Samuel Tombs from Pantheon Macroeconomics basically said what we’re all thinking: “Yeah, he probably told Trump he’d cut rates to get the job, but wait until he’s actually Fed Chair.” During the 2008 financial crisis, Warsh was more concerned with fighting inflation than keeping everyone employed. If inflation stays stubbornly near 3%, don’t expect him to prioritize Trump’s tweets over his legacy.
2. Trump Actually Respects Fed Independence (Plot Twist!)
Here’s something that might blow your mind: Trump could’ve picked someone way more willing to kiss the ring. The fact that he chose Warsh over, say, Kevin Hassett (who was basically Trump’s economic cheerleader) suggests something wild – Trump might actually understand that markets need to believe the Fed is independent.
Jason Pride from Glenmede put it perfectly: picking “this Kevin” instead of the other Kevin shows Trump gets it. Warsh might lean toward rate cuts more than current Fed Chair Powell, but he’s not going to look like Trump’s puppet. And honestly? That’s probably better for everyone’s 401(k) in the long run.
3. AI Stocks Might Be in for a Reality Check
Remember 2022? When rates went up and all those “revolutionary” crypto and meme stocks crashed harder than a Windows 95 computer? Well, if Warsh turns out to be the hawk many suspect, we might see AI stocks get a similar wake-up call.
Mark Malek from Siebert Financial dropped some truth bombs: tighter money policy could separate the AI wheat from the chaff. Translation? Companies with actual business models will survive, while those riding pure hype might find themselves in the digital graveyard next to Pets.com.
“Warsh’s tight money policy could pop the AI bubble before it fully inflates,” Malek said. Which honestly might not be the worst thing – better a controlled deflation than a spectacular crash that takes your retirement fund with it.
The Bottom Line: Warsh takes over in May (assuming the Senate plays nice), and nobody really knows which version we’ll get – the recent rate-cutting convert or the inflation-fighting hawk from his past. Either way, it’s going to be an interesting ride. Buckle up, buttercup.