Over the last few months, there has been much speculation about one question: Who will lead the US Federal Reserve next?
Prediction markets swung sharply week by week between a handful of candidates. This week, it appears Kevin Warsh has emerged as President Trump’s nominee.
So what does that mean for markets - and for long-term investors?
Rate Cuts Are Still the Likely Direction
Our central view remains consistent: Whoever takes the chair, we’re likely to see more interest-rate cuts than markets currently expect.
That matters because short-term interest rates underpin everything from cash returns to bond yields to equity valuations.
Warsh himself has historically been seen as relatively hawkish - more cautious about inflation and sceptical of the Fed expanding beyond its core remit.
But even so, we expect him to:
- allow short-term rates to drift lower over time
- remain firmer on the long-term balance sheet
- keep longer-dated yields more stable
In other words: short rates down, long rates steadier.
That pattern was already visible when the nomination news broke - the two-year Treasury yield dipped, while the ten-year held firm.
Should Investors Worry About Fed “Independence”?
Some investors have raised concerns about whether the Fed will remain independent under political pressure.
Our view is more measured.
Central banks have never been completely detached from politics - and monetary policy is only one force shaping growth, inflation and markets.
The bigger point is this: markets will adjust, but the long-term direction of travel matters more than the headlines.
What We’re Doing at TCFP
As always, we avoid reacting to week-by-week speculation.
Instead, our portfolios are built to remain resilient across different rate paths:
- maintaining broad diversification
- balancing shorter-dated and longer-dated fixed income exposure
- focusing on quality assets that can compound through cycles
- keeping liquidity where it matters
Rate expectations will continue to swing - just as the prediction markets have done.
But our job is not to forecast every twist.
It’s to ensure your plan stays on track regardless.