Stocks tumble on bets Kevin Warsh is Trump's Fed pick

Warsh's potential nomination as Fed chair raises concerns over a smaller central bank balance sheet

Jan. 29, 2026 at 10:55pm

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Stocks slumped, the dollar rose, and bond yields shot up after reports that President Trump is preparing to nominate former Federal Reserve Governor Kevin Warsh as the next Fed chair. Warsh is seen as favoring lower interest rates, but also wanting the Fed to have a smaller balance sheet, which has unsettled markets.

Why it matters

Warsh's potential nomination as Fed chair has sparked concerns that he may pursue a more hawkish monetary policy stance compared to the current Fed leadership, potentially leading to higher interest rates and a reduction in the central bank's balance sheet. This could have significant implications for financial markets and the broader economy.

The details

Stocks in Asia tumbled, with MSCI's broadest index of Asia-Pacific shares outside Japan falling as much as 1.3%. S&P 500 and Nasdaq futures also declined. The U.S. dollar index rose 0.3%, reversing recent weakness, while the yield on the 10-year Treasury bond jumped 4 basis points to 4.265%. Precious metals like gold and silver plunged, and oil prices fell as well. The markets are reacting to the prospect of Warsh, who is seen as preferring lower interest rates but also wanting a smaller Fed balance sheet, potentially becoming the next Fed chair.

  • On Thursday, Warsh visited the White House for a meeting with President Trump.
  • On Friday, reports surfaced that the Trump administration is preparing to nominate Warsh as the next Fed chair.

The players

Kevin Warsh

A former Federal Reserve Governor who is seen as a potential nominee for the role of Fed chair under the Trump administration.

Donald Trump

The current President of the United States, who is reportedly preparing to nominate Warsh as the next Fed chair.

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What they’re saying

“Warsh 'is on record as saying he prefers lower rates. But the trade-off that he makes with lower rates is that he wants the Fed to have a smaller balance sheet.'”

— Damien Boey, Portfolio Strategist, Wilson Asset Management

“We've definitely seen some dollar buying straight away on the back of it. He's known to the markets and will probably calm things down slightly.”

— Tim Kelleher, Head of Institutional FX Sales, Commonwealth Bank

What’s next

The markets will closely watch for any official announcement from the Trump administration regarding the nomination of the next Federal Reserve chair.

The takeaway

Warsh's potential nomination as Fed chair has unsettled financial markets, as his policy preferences for lower interest rates but a smaller central bank balance sheet are seen as potentially disruptive to the current monetary policy framework.