Why have we been seeing intense volatility in the markets since Friday?
And when I say markets, I mean everything. From crypto, which literally went crazy on the news, to precious metals like gold and silver, which saw sudden swings. And no, it is not just geopolitics, not just interest rates, not just artificial intelligence. One of the main reasons was Donald Trump’s announcement regarding the new leadership of the FED.
And when Trump makes statements of this kind, we know they are never just political news. They are events that shift the balance.
On Friday, Donald Trump announced that he is replacing Jerome Powell as head of the US Federal Reserve and is proposing Kevin Warsh for the position. A decision that ended a months-long marathon filled with rumors, speculation, and behind-the-scenes pressure.
“I have known him for years and I have no doubt that he will go down in history as one of the greatest Fed chairs, maybe the greatest,” Trump said via Truth Social.
But it is not just about the person. It is also about the message. This change comes after years of intense confrontation between Trump and Powell. The US president had repeatedly accused Powell of being hesitant to cut interest rates, of not supporting growth, and of turning the Fed into a slow, bureaucratic monster. Now he wants a restart.
Kevin Warsh is a former member of the Federal Reserve Board of Governors, having served during the presidency of George W. Bush. He is 55 years old, has worked at Morgan Stanley, and holds significant influence within Wall Street’s investment circles. A man with deep understanding of monetary policy and sharp views.
He is not seen as just a technocrat. He is seen as a reformer. In a recent interview, he stated that “the Fed needs regime change,” meaning a radical shift in direction. He believes the current leadership has lost the trust of the markets and that a new philosophy is required. This puts him in direct opposition to the existing central bank establishment.
Trump’s choice is not random. Warsh has the credentials to pass through Congress, has the backing of investors, and at the same time is not a mouthpiece. In other words, while he shares common ground with Trump, he will not hesitate to disagree when he believes it is necessary. That makes him more credible in the eyes of the market.
So what does this change mean in practice? This is where things get truly interesting.
The first and most immediate consequence is pressure for interest rate cuts. Trump made it clear. He wants a chair who will cut rates, and that is why he chose him. So if the appointment is approved, investors are pricing in at least two rate cuts within the year, as shown by the FedWatch Tool. This could boost equities, crypto, and real estate, but also risk reigniting inflation.
At the same time, we may see:
What worries the market most, however, is the uncertainty around the Fed’s independence. If the central bank is seen as politicized, investors will demand higher returns to take risk. That means higher volatility and potentially sharper corrections.
On top of all this, the Department of Justice is investigating Powell over the Fed building renovation project, with many talking about coordinated pressure to force his resignation so that the new chair can assume duties much sooner.
We are therefore talking about a set of circumstances rarely seen in the history of the American economy. And the markets have already started to price it in.
