What does Trump\u2019s nomination of Kevin Warsh to be the next Fed chair mean for markets and the interest rate trajectory?<\/p>\n\n\n\n
Last Friday, U.S. President Donald Trump nominated Kevin Warsh to succeed Jerome Powell as the next chair of the U.S. Federal Reserve (Fed). Warsh is a veteran of the central bank, having served as a Fed governor from 2006 to 2011. He will need to be confirmed by the U.S. Senate before officially assuming the role, and while this could be a lengthy process, we wouldn\u2019t expect any significant roadblocks. Assuming he is confirmed, markets appear to believe that he will be an advocate for lower interest rates, which have long been a priority for Trump. In the past, Warsh seemed to revel in being perceived as a hard-money central banker\u2014an easier image to uphold in a world of excess monetary support. In recent years, he has been critical of quantitative easing (QE), fearing that it would stoke inflation. Ultimately, it did not\u2014though it did distort financial markets. In the summer of 2008, Warsh was part of the Federal Open Market Committee (FOMC) faction that worried about inflation, which proved to be unfounded amid the Global Financial Crisis. And as his name began to be mentioned as a potential Fed Chair candidate, he talked down data-dependent decision making, which has been the Fed\u2019s typical approach under Powell. Warsh speaks frequently about the potential of artificial intelligence (A.I.) productivity boosts as a means of keeping inflation in check. He\u2019s also been critical of current Fed models and dogmas, including the belief that economic growth automatically fuels faster wage growth\u2014a criticism we tend to share. Under a Warsh-run Fed, we\u2019d expect dissents to be more frequent. But do not underestimate the sway of the Fed chair\u2014and as an ex-Fed governor, Warsh knows how to play the game. Politically, Warsh\u2019s experience allows for the optics of Fed independence to be maintained. Equity markets stumbled slightly in the immediate aftermath of the announcement, seemingly unsure what to think. But in the longer run, a low-rates advocate should be bullish for equities and bearish for bonds.<\/p>\n\n\n\n
Bottom line: Under Warsh, it is likely that U.S. monetary policy will be looser than it has been under Powell, which should be good news for equity markets and bad news for bonds.<\/strong><\/p>\n\n\n\n A new report last week showed that U.S. consumer confidence has fallen to its lowest level since 2014.1<\/sup><\/a> Is this a major warning sign for consumer spending and the overall health of the economy? Not necessarily, in our view. In general, consumer surveys like this one\u2014which was conducted by the Conference Board, a nonprofit think tank\u2014have been poor indicators of the economic reality. One reason is the political divide: recent events in Minnesota have upset a lot of people. Also, the cost of living likely plays a role. While inflation has come down, cumulative inflation since the pandemic has affected housing affordability, food prices, and heath care costs. It is a bit unusual to see such low confidence numbers at a time when the U.S. is not experiencing old-fashioned economic pain in the form of major job losses. Record stock prices would also typically lead to a more upbeat consumer. That said, despite consumers’ flagging confidence, we aren\u2019t particularly worried about their financial health. The labour market did experience a bit of a slowdown last year. But there are also significant tax refunds\u2014which resulted from income tax cuts in 2025\u2014that are about to hit U.S. consumers\u2019 bank accounts. Trump hopes that this influx will bode well for him politically as the midterm elections approach.<\/p>\n\n\n\n Bottom line: Despite plummeting U.S. consumer confidence likely driven by political and cost-of-living issues, we do not have significant concerns about consumers\u2019 overall health.<\/strong><\/p>\n\n\n\n Gold continued its meteoric climb early last week, with prices briefly topping USD $5,500 per ounce2<\/sup><\/a> prior to Trump\u2019s nomination of Kevin Warsh for Fed chair, which caused a selloff in precious metals. We see several reasons for this latest surge. First and foremost, gold\u2019s best friend has been Trump, who has caused waves with his geopolitical statements and trade-related decisions. The conflict over Greenland, as well as the U.S. military action in Venezuela and tension with Iran, appears to represent a tipping point, as governments and investors alike began to wonder how far Trump would be willing to go. Some investors may also be skeptical of the administration\u2019s economic agenda despite strong corporate earnings. Portfolio managers and asset allocators have gradually realized that fixed income may not necessarily be the best hedge to equities in these conditions, and that has increased the motivation to diversify. In that respect, gold has a long track record\u2014thousands of years, one might argue\u2014as a reliable store of value. Gold has also served as a particularly good hedge over the past five to ten years, which is why we have consistently maintained a gold position in our portfolios for some time. Overall, markets\u2019 concerns remain heightened, and that has been a tailwind for gold prices. Other precious metals had also done well prior to Friday\u2019s selloff: in particular, silver had started to catch up on a reacceleration of U.S. growth and China\u2019s emphasis on sustaining its economic momentum. We\u2019ve also seen good news on global trade flows, which could indicate a pickup in manufacturing. In particular, electronics manufacturing requires a variety of metals\u2014including gold, silver, and copper\u2014which could further increase demand.<\/p>\n\n\n\n Bottom line: While Kevin Warsh\u2019s nomination caused a substantial dip in precious metal prices, the overall economic backdrop\u2014including significant geopolitical uncertainty\u2014remains supportive of further price increases.<\/strong><\/p>\n\n\n\n —<\/p>\n\n\n\n Originally Posted February 2, 2026 – <\/p>\n\n\n\n 1<\/sup>Lucia Mutikani, \u201cUS consumer confidence dives to a more than 11-1\/2-year low,\u201d Reuters<\/em>, January 27, 2026. <\/a><\/a><\/p>\n\n\n\n 2<\/sup>Valerio Baselli, \u201cGold Price Surges Above USD 5,500: Here\u2019s Why,\u201d Morningstar Canada<\/em>, January 29, 2026. <\/a><\/a><\/p>\n\n\n\n Disclosures:<\/p>\n\n\n\n The viewpoints expressed by the Portfolio Manager represents their assessment of the markets at the time of publication. Those views are subject to change without notice at any time without any kind of notice. The information provided herein does not constitute a solicitation of an offer to buy, or an offer to sell securities nor should the information be relied upon as investment advice. Past performance is no guarantee of future results. This communication is intended for informational purposes only.<\/p>\n\n\n\n BMO Global Asset Management is a brand name under which BMO Asset Management Inc. and BMO Investments Inc. operate.<\/p>\n\n\n\n Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements. In connection with any forward-looking statements, investors should carefully consider the areas of risk described in the most recent simplified prospectus.<\/p>\n\n\n\n This article is for information purposes. The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Investments should be evaluated relative to the individual\u2019s investment objectives and professional advice should be obtained with respect to any circumstance.<\/p>\n\n\n\n Commissions, management fees and expenses (if applicable) all may be associated with investments in mutual funds. Trailing commissions may be associated with investments in certain series of securities of mutual funds. Please read the fund facts, ETF facts or prospectus of the relevant mutual fund before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. 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Distributions are not guaranteed and are subject to change and\/or elimination.<\/p>\n\n\n\n BMO Mutual Funds are managed by BMO Investments Inc., which is an investment fund manager and a separate legal entity from Bank of Montreal.<\/p>\n\n\n\n \u00ae\/\u2122Registered trademarks\/trademark of Bank of Montreal, used under licence.<\/p>\n","protected":false},"excerpt":{"rendered":" What does Trump\u2019s nomination of Kevin Warsh to be the next Fed chair mean for markets and the interest rate trajectory?<\/p>\n","protected":false},"author":1102,"featured_media":143597,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_acf_changed":true,"footnotes":""},"categories":[18,6,8,9,26,3],"tags":[],"contributors-categories":[13733],"class_list":{"0":"post-238608","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-macro","8":"category-north-america","9":"category-region","10":"category-securities","11":"category-text-articles","12":"category-traders-insight","13":"contributors-categories-bmo-exchange-traded-funds"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"\nConsumers<\/strong><\/h2>\n\n\n\n
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