President Trump nominated Kevin Warsh in January to replace Jerome Powell as Federal Reserve Chair, a pick Warren Buffett publicly endorsed with a two-word approval. Warsh has signaled that the Fed's work on inflation is not yet complete, and bond traders are positioning in agreement with that assessment. The convergence of a high-profile investor endorsement and market pricing aligned with a hawkish stance puts rate-cut expectations under fresh pressure.
If bond traders and the incoming Fed Chair both believe inflation is not fully beaten, the market will price in fewer rate cuts for 2025, which pushes bond yields higher and compresses valuations on growth stocks. Rate-sensitive sectors like real estate and utilities face the most direct headwind. Equity investors holding long-duration assets should treat this as a signal that the easy-money tailwind remains off the table.
Senate confirmation hearings for Kevin Warsh, date TBD. Next FOMC rate decision, June 17-18. May CPI inflation report, ~June 11.
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