Why Wall Street is unhappy with Trump's pick for Fed chair

"Dutta tells Axios: "I don't think people should change their investment plans around Warsh. The Fed is bigger than any one person. At the margin, Warsh represents a bit of uncertainty." One concern is that Warsh will cut interest rates now to appease Trump even if lower rates aren't warranted, which could result in the need for increases later on."

"But for clients who have concerns, "the hedge here is to diversify internationally," Thierry Wizman, Macquarie Groupglobal rates and currency strategist, tells Axios. "Stay with U.S. growth, but you hedge out your dollar exposure," he says, adding that this can have a bonus effect since a weaker dollar benefits earnings of multinational companies like those in the Magnificent 7."

""He was a member of the Fed that increased rates 17 meetings in a row which precipitated the Great Financial Crisis," Jay Hatfield, chief investment officer at InfraCap wrote in a note to clients. "Because Warsh has been a policy hawk his entire life, his newfound dovishness looks very suspect," Dutta added, which fuels uncertainty about what Warsh will do."

Investors express unease about Warsh's nomination but are not broadly reconfiguring portfolios. Some worry Warsh might cut rates prematurely to placate Trump, risking later rate increases. A suggested hedge is international diversification and hedging dollar exposure, which could also boost multinational earnings when the dollar weakens. Historical concern stems from Warsh's past hawkish stance during the financial crisis, including support for prolonged rate hikes, creating skepticism about any recent dovish signals. Warsh expects AI-driven productivity gains to provide room for lower rates without sparking inflation, potentially benefiting tech companies if rates remain lower.

Read at Axios