Advisors react to President Trump's choice of Kevin Warsh as next Fed Chair

After months of culling intrigue, President Donald Trump finally made his Fed Chair choice last Friday, tapping former Federal Reserve governor Kevin Warsh to succeed Jerome Powell.

And now the wealth management world gets to weigh in on the 55-year-old Warsh, now an adviser at Stanley Druckenmiller’s Duquesne Family Office and a fellow at Stanford University’s Hoover Institution.

Steven Wieting, co-founder & CIO of CIO Group, for one, can’t escape the irony that among all of Trump's publicly discussed picks, Warsh's comments lean the most hawkish. He points out that the Warsh selection caused the US dollar and bond yields to rise and gold to plunge. 

“Given the recent market setting of falling confidence in the US dollar, we have a hint of hope that Warsh's strong historical emphasis of price stability as a singular focus for the Fed can be stabilizing. Yet Warsh has also suggested limited Fed intervention in crisis periods. This could increase risk aversion in the short term,” Wieting said.  

Dory Wiley, CEO & president of Commerce Street Holdings, meanwhile, believes Warsh brings a wealth of experience from his time as a Fed Governor during the financial crisis, where he demonstrated a keen understanding of monetary policy and a commitment to economic stability.

“His hawkish stance on inflation—advocating for prudent rate policies to prevent overheating—aligns perfectly with the strong economic foundation President Trump has rebuilt and with what is still the biggest risk if not treated properly. This is a smart, forward-thinking choice that underscores the President's dedication to appointing top-tier talent who can sustain America's prosperity,” Wiley said.

Moving on, David Abella, director of investments at GoalVest, calls Warsh a “solid compromise choice” that seems to indicate the administration is concerned about stability in the fixed income markets. He notes that the speculative parts of the market reacted negatively, likely in light of his past hawkishness. 

Abella added that Warsh will likely end up similar to Jerome Powell given where the economic cycle is at presently. 

“Mr. Warsh has been considered a monetary hawk and was critical of quantitative easing.  However, given some prior softness in the employment numbers he may end up more accommodating to monetary easing than his past might indicate,” Abella said.

Randol Curtis, chief investment officer at Thryve Wealth Management, is also excited about the announcement of Kevin Warsh as Federal Reserve Chairman. In his view, he is a highly qualified and experienced nominee with prior Federal Reserve and private sector experience. Furthermore, in Curtis’ view he understands the tradeoffs between Fed policy rate setting and balance sheet management.

Curtis points out that the Fed Chair represents only one of 12 votes, so in that sense, he believes Fed governance will remain stable in accordance with the twin mandates of price stability and maximum employment.  On the other hand, with respect to communication style, messaging and other important Federal Reserve decisions, he believes Warsh is likely “to put his personal stamp on the position that may improve on Powell's approach.”

QUESTIONS OF INDEPENDENCE    

As to how much independence Warsh will maintain from the President who appointed him, CIO Group’s Wieting notes that market participants will have limited insight into his private discussions with Trump. Nevertheless, in his opinion the Fed itself “is quite strong and able to guide policy independently, even of the Chair.” 

Wiley, meanwhile, is confident that Warsh firmly understands the importance of an independent Federal Reserve and expects him to promote and uphold that tradition.

“President Trump obviously wanted to choose someone who shares a vision for a robust economy, but I expect Warsh's thought process will be data-driven and autonomous with the group. This isn't a problem—it's a strength,” Wiley said.

GoalVest’s Abella calls Warsh “likely the most independent of all the candidates,” saying he feels like the administration did try its best to keep some level of Fed independence. 

Finally, Thryve’s Curtis views his trusted relationship with Trump through Warsh's father-in-law Ronald Lauder as an advantage, not a problem.

“Warsh understands very well the implications of Fed policy. We believe that his ability to communicate with the White House will help coordinate policy-making and public messaging at the highest level.  Overall, this could be a strong positive for business and the US economy,” Curtis said.