Trump trusts Kevin Warsh. That's the headline. Not "Trump respects" or "Trump nominated." Trust. Like Warsh is holding his wallet at a house party.
Warsh will hold rates steady this week. Everyone knows this. The story pretends this is news. It's not news. Holding rates steady is what central bankers do when they don't want to get fired before lunch.
The real angle is trust gives Warsh "room to pursue longer-term changes." Room. As if the Chairman of the Federal Reserve was previously working out of a broom closet and now Trump gave him the corner office with the good light.
Longer-term changes means nothing. It's a phrase designed to survive a Senate hearing. Could mean anything from adjusting reserve requirements to replacing the dollar with baseball cards. The vagueness is the point.
Retail traders will read this and think they've unlocked alpha. They'll buy rate-sensitive stocks or short bonds or do whatever their Discord told them constitutes a "Fed pivot play." They'll be wrong. They're always wrong. But this time they'll be wrong with confidence because a headline used the word trust.
Trust between a president and a Fed chair has predicted exactly nothing in market history. Paulson trusted Bernanke. Didn't stop 2008. Nixon trusted Burns. Didn't stop inflation or resignation. FDR trusted Eccles. Still had to threaten the Supreme Court to get anything done.
The Fed will do what it always does. Print money when banks need it. Pretend to be independent when journalists are watching. Adjust rates based on lagging data that was wrong when it was collected.
Warsh could announce a return to the gold standard or a policy of lighting cash on fire in the Rose Garden. Your charts won't predict it. Your technical levels won't protect you. But sure, draw another trendline and tell yourself presidential trust is a leading indicator.
Photo by Gautam Krishnan on Unsplash
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