Weekly Update 1-30-2026: Kevin Warsh Nominated to be Next Federal Reserve Chairman
- Fed keeps rates unchanged
- UPS surprises to the upside
- Elevance faces reimbursement challenges
- Boeing free cash flow grows
- ...and many, many more earnings summaries!
THE nomination
According to a post on Truth Social media platform, President Trump intends to nominate Kevin Warsh to be the next chair of the Federal Reserve. “I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best,” Trump wrote. “On top of everything else, he is ‘central casting,’ and he will never let you down.” Warsh, who served on the US central bank’s Board of Governors from 2006 to 2011 and has previously advised Trump on economic policy, would succeed Jerome Powell when his term at the helm ends in May. It marks a comeback for Warsh, 55, whom the president passed over for the top job in 2017 when he selected Powell. Interestingly, Warsh aligned himself with Trump last year by publicly arguing for a faster pace of rate cuts last year, going against his longstanding reputation as an inflation hawk. Warsh resigned from the Fed in 2011 after it embarked on a second round of bond purchases to help the economy after the Global Financial Crisis of 2009. He even called for higher rates during the depths of the financial crisis. As chief US economist at JPMorgan Chase & Co. Michael Feroli said, “The two big questions are who’s the real Kevin Warsh and does that evolve?”
Warsh was picked over other finalists including Christopher Waller, a current Fed governor; Kevin Hassert, the National Economic Council director; and BlackRock Inc. executive Rick Rieder. Warsh received a surprise endorsement from Canadian Prime Minister Mark Carney who said in a post: “[He’s] a fantastic choice to lead the world’s most important central bank at this pivotal moment.” Carney has had a contentious relationship with Trump since coming into office as debates about border tariffs rage on. Another key endorsement we will be tracking needs to come from the bond market. It is no secret that President Trump wants substantially lower rates, but traders need to know that the Fed will not abandon its desire to keep a lid on prices. Yields on the 30-year bond settled around 4.876% as stocks opened trading today after rising closer to 4.910% in the overnight hours after news of the pick became public. The longer dated bond is more susceptible to inflationary pressures than the usual 10-year benchmark and is a better guide to what the market thinks about longer term pricing trends. Last year, after the announcement of “Liberation Day” tariffs, the 30-year yield broke above 5.0% within weeks and essentially brought the equity markets to its knees. So-called bond vigilantes were simply not going to allow inflation through product levies to derail the economy. Subsequently, the president announced what was essentially a 90-day cooling off period as bilateral deals were worked on. We’ve stayed below that psychological key yield level since July of last year, and it has been no surprise that the second half of 2025 saw notable gains in stocks as yields stay calm. We will monitor how the bond markets sees the nomination process unfolding in the weeks to come.
The path from nomination to confirmation will be challenging. On Jan. 9, the Fed received subpoenas regarding Powell’s 2025 congressional testimony about a building renovation project. Powell issued an extraordinary, videotaped statement decrying the probe and essentially blaming Trump for attacking the independence of the Fed. Several Republican lawmakers came to the central bank’s defense, with one, North Carolina’s Thom Tillis, pledging to withhold support for any Fed nominee until the legal matter was settled. Tillis, today, on social media said Warsh was a “qualified nominee with a deep understanding of monetary policy.” However, he made clear he would not back Warsh’s nomination “until the DOJ’s inquiry into Chairman Powell is fully and transparently resolved.” Tillis is a member of the Senate Banking Committee, which will vet the nomination. Tim Scott, who chairs that panel, said he looks forward to “leading a thoughtful, timely confirmation process.” Stay tuned.
The nomination of Warsh is not a surprise to us, and we continue to have faith in the Federal Reserve. As we detailed in the quarterly commentary (available in your client vault at our website: www.SGKWealthadvisors.com), the structure of the Federal Open Market Committee is such that it takes more than one person to set monetary policy. Though the chair plays an enormous role in setting the agenda and communicating to the markets and public at large, at the end of the day monetary policy comes down to a vote. Having been a former Fed member, Warsh should understand the gravity of that vote and the process. He should be just as vigilant about supporting the Fed’s independence as any other member of the committee. History has shown that any other path has unfortunate consequences.
FOMC meeting
As expected, the Federal Open Market Committee (FOMC) voted, by a 10-2 margin, to keep its benchmark federal funds rate in a range of 3.50%-3.75%. Governors Christopher Waller and Stephen Miran dissented in favor of a 25 basis point (0.25%) reduction. In its post-meeting statement, policymakers said “job gains have remained low, and the unemployment rate has shown some signs of stabilization.” Decision makers also said that inflation remained slightly elevated from the 2.0% target even with the pace of economic growth defined as “solid.” From the statement, the takeaway seems to be that the tone inside the room has shifted from one of spirited debate to more consensus-seeking.
During the post-meeting press conference, Chairman Jerome Powell said there was “broad support on the committee for holding…including among non-voters.” He noted that the upside risks to inflation and downside risks to employment were both diminished since the committees last meeting in December of last year. Powell also noted that tariff pressure remains a “one time” effect, which is good news. That is, most of the goods inflation we are seeing is from these levies and not from underlying demand. If the price pressure was coming from demand overwhelming supply, the Fed would have to start looking at rate increases to deal with that sooner than anticipated. Services are showing ongoing disinflation, which is another healthy development.
Immediately following the press conference, according to the futures market, the odds of a rate cut are highest at 46% at the FOMC meeting which concludes on June 17 (This morning, after the Warsh announcement, those odds are at 50%). Thus, investors are assuming the Fed is likely to remain on pause for some time. Many prognosticators thought the Fed was sure to cut rates twice in 2026, but even now that is less certain. We will not get a summary of economic projections which include the Fed’s thinking on future rates, often referred to as the dot-plot, until after the next meeting which concludes on March 18. Between now and then, there will be a number of economic data points for the Fed and its staff to analyze. That is, assuming Congress does not shut down the federal government…again…at midnight tonight. The last shutdown near the end of 2025 was the longest on record and resulted in numerous delays to crucial data that economists depend upon. The likelihood of an extended closure was reduced when President Trump and Senate Democrats said there is a deal in place. It would temporarily fund the Department of Homeland Security (DHS), which has been the subject of intense scrutiny following the recent deaths of citizens that occurred during Immigration and Custom Enforcement operations. Given that the FOMC makes decisions on a meeting-by-meeting basis, it is crucial to have timely and accurate data in order to make key forecasts and vote appropriately on monetary policy. Under the agreement, the Senate would pass five of the six spending bills that have already cleared the House, which would fund the federal government for the rest of the fiscal year ending September 30. A two week extension for DHS would be included before it would run out of funds. The House of Representatives would need to pass this new version before it would then go to the president’s desk to be signed into law. But the representatives are out of town on recess until Monday so, technically, the government would partially shut down for (hopefully) only the weekend, assuming they return and pass it.
During the press conference, Powell deftly steered clear of answering any questions which veered into the political realm. When asked why he attended the Supreme Court hearing last week over President Trump’s attempt to remove Fed Governor Lisa Cook, he commented: “That case is perhaps the most important legal case in the Fed’s 113-year history. I thought it might be hard to explain why I didn’t attend.” The questions about the subpoenas from the Department of Justice will likely continue, but Powell intends to focus on his day job. He emphasized that the Fed’s credibility would be hard to restore if it were lost, but he concluded, “We haven’t lost it. I don’t believe we will.”
Company reports
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