Markets Have Already Picked the Next Fed Chair — Now They’re Waiting for Trump to Say the Name

Markets are bracing for a major policy inflection point after President Donald Trump said he plans to announce his pick for the next Federal Reserve chair tomorrow morning, ending months of speculation over who will succeed Jerome Powell when his term expires in May. While no decision has been formally confirmed, trading behavior across rates, FX, commodities, and equities suggests investors are increasingly convinced that former Fed governor Kevin Warsh will get the nod.

That conviction hardened late Thursday after reports surfaced that Warsh visited the White House, paired with Trump’s comment that his choice “wouldn’t surprise people” and “could have been there a few years ago.” Warsh, notably, was a finalist for the Fed chair role in 2017 before Trump ultimately selected Powell. Prediction markets reacted swiftly. On both Polymarket and Kalshi, Warsh’s implied odds surged into the mid-80% range, while rival candidates faded. Importantly, however, this remains a rumor — and markets may be underpricing the risk of a surprise outcome.

One such surprise could still come in the form of Rick Reider , BlackRock’s chief investment officer for fixed income. Rieder had vaulted into the lead on prediction markets earlier this week, buoyed by his deep market credibility, high media visibility, and vocal support for lower interest rates — a clear priority for Trump. Rieder has publicly argued that the policy rate should move toward 3%, framing that level as closer to equilibrium. While his odds have dropped sharply in recent hours, they have not collapsed to zero, and markets should be careful about assuming the race is over.

Still, price action suggests traders are positioning for Warsh. U.S. Treasury yields have climbed notably, with the 10-year yield pushing toward 4.25% and the yield curve steepening — a move that reflects expectations of tighter balance sheet policy rather than aggressive front-end rate cuts. Warsh is widely viewed as a “pro-market” pick, but that label requires nuance. Historically, he has been a hawk, particularly on quantitative easing and the size of the Fed’s balance sheet. Traders expect that a Warsh-led Fed would prioritize shrinking the balance sheet more aggressively, potentially draining liquidity even if headline rates eventually move lower.

That distinction matters. While both Warsh and Rieder have expressed support for lower policy rates around 3% over time, markets see very different paths to get there. Rieder is perceived as more overtly dovish and more responsive to financial conditions, with a bias toward easing to support housing, risk assets, and growth. Warsh, by contrast, is seen as more focused on restoring policy credibility, reining in excess liquidity, and asserting Fed independence — at least rhetorically. The market reaction so far suggests investors believe Warsh would cut rates under political pressure, but offset that accommodation through balance sheet tightening.

Cross-asset moves reflect that interpretation. The dollar index has rebounded sharply, pressing higher off the 96 level, consistent with expectations for relatively tighter financial conditions under Warsh. Gold has sold off nearly 3%, a notable move that aligns with rising real yields and a less accommodative liquidity backdrop. Bitcoin, meanwhile, is caught in a tug of war. On one hand, Warsh is viewed as crypto-friendly relative to the current Fed leadership. On the other, broader deleveraging tied to the ongoing tech sell-off has forced traders to liquidate winners, and bitcoin remains one of the few assets with sizable unrealized gains despite recent weakness.

Equities are beginning to show early signs of rotation. Small-cap stocks, which tend to benefit from a steeper yield curve and a domestic growth focus, are expected to see a boost if Warsh is confirmed. Financials could also emerge as relative winners, particularly banks that benefit from higher long-term yields and improved net interest margins. At the same time, long-duration assets — including high-multiple tech stocks and gold-adjacent trades — appear vulnerable if balance sheet tightening becomes a central policy theme again.

That said, the most important message for investors heading into the announcement is that nothing is official yet. The White House has pushed back against speculation, and Trump himself has shown a willingness in the past to defy market expectations at the last moment. A surprise pick — whether Rieder, Kevin Hassett, or even current Fed Governor Christopher Waller — would likely trigger sharp reversals across rates, FX, and commodities, given how aggressively markets have leaned into the Warsh narrative.

For now, however, markets are trading as if Warsh will be named — and that positioning itself is the story. The steepening yield curve, firmer dollar, weaker gold, and cross-currents in crypto all reflect a collective bet that the next Fed chair will emphasize balance sheet discipline over sustained liquidity support. Whether that bet pays off will be decided tomorrow morning.

Until then, traders are left navigating a familiar pre-announcement dynamic: high conviction, high positioning, and very real headline risk. In short, the market has already chosen its Fed chair — even if the president hasn’t yet said the name out loud.