GM. This is Milk Road Macro, the newsletter that tracks Fed Chair contenders like it’s fantasy football for finance nerds.
Here’s what we got for you today:
- ✍️ A big frontrunner has emerged in the race for Fed Chair
- 🎙️ The Milk Road Macro Show: The AI Acceleration Era: The Economic Shift That Will Define the Next Decade w/ Tad Smith
- 🍪 Big U.S. firms have recently announced major layoffs
DTFs (Decentralized Token Folios) on Reserve are indices that bundle multiple crypto assets into a single token. Read more about DTFs here.
Prices as of 8:00 AM ET.
A BIG FRONTRUNNER HAS EMERGED IN THE RACE FOR FED CHAIR
We may now know who the next Chair of the Federal Reserve will be.
Jerome Powell’s term as Fed Chair ends in May 2026 - and President Trump will decide the next person for the job.
This could be one of the most important decisions made by anyone, anywhere, concerning what asset markets might do next.
The selection process is now in the late stages - and we may even get a confirmed name before the end of the year.
But general consensus is now gathering around Kevin Hassett, after a big news story earlier this week.
A Hassett appointment is likely to be generally positive overall for risk asset markets like stocks and bitcoin.
So, what’s going on with Kevin Hassett?
And what would Hassett as Fed Chair mean?
Let’s take a look…
Kevin Hassett now well clear in race
The Fed Chair race had seemed to be fairly open in recent months.
But this week, a big Bloomberg story dropped pointing to Kevin Hassett as the overriding favorite for the job, citing “people familiar with the matter”.
This is a credible story from a credible news source - with asset markets and prediction markets seemingly pricing in a high chance that Hassett will take the job.
According to speculators on Polymarket - there is now a 60% chance that Hassett will be the pick for the Fed Chair role, up from 20% in September.
It’s possible that this Bloomberg story was seeded as a “trial balloon” to gauge the reaction.
But regardless, it looks like Hassett is now gaining a lot of momentum in the race.
So, who is Kevin Hassett?
Hassett, 63, is an economist with a PhD from the University of Pennsylvania.
He is currently the Director of the White House National Economic Council, and is often spotted on television shows defending the Trump administration’s policies.
He also served as Trump's Council of Economic Advisers chair during the president’s first term.
Hassett isn't “a traditional central banker” and has never been part of the FOMC voting board - although he did work at the Federal Reserve as a senior economist in the 1990s.
What does this mean?
If appointed, Hassett as Fed Chair would likely prioritize economic growth and political alignment with the White House over strict inflation hawkishness.
Out of the several frontrunners that have emerged in recent months, Hassett is by far the biggest “Trump ally”.
He’s probably the most likely Fed Chair pick to “aim to please” the president.
This means lowering rates, and potentially quickly.
In a recent interview, Hassett said:
“I view low rates as essential for serving the president and the economy.”
Hassett has been vocal about his frustration with the Fed's current cautious stance.
He argued in a recent Fox News interview that he'd "be cutting rates right now" because "the data suggests that we should".
He'd likely de-emphasize the Fed's 2% inflation target in favor of "full employment" and GDP acceleration, tolerating temporary inflation spikes if they support Trump's pro-growth agenda.
Although, it’s worth pointing out that the Fed Chair does not have absolute power over interest rate decisions - they are decided by a vote involving the 12 members of the FOMC board.
But the Chair does generally have an outsized influence among FOMC members.
However, it’s possible that some FOMC members might not respect Hassett highly - he could be seen as an inexperienced pick for Fed Chair.
The biggest fear from a Hassett Fed Chair term would be a rebound in inflation, if rates are cut too far, too fast.
In the most extreme scenario, this could then force the Fed to pivot to a more hawkish stance or even start to raise rates again if inflation is viewed as being “unanchored”.
But recently, market expectations of forward inflation have been falling hard, implying a disinflationary impulse currently.
2-year inflation swaps and 2-year inflation breakevens (market-derived expectations of inflation over the next two years) have been dropping fast in recent weeks.
This is an advantage for the Fed right now, because it allows room for members to be more dovish without igniting inflationary pressures.
Elsewhere, Hassett has some experience within the crypto sector - and so he could be supportive of the industry.
He was a part of Coinbase’s “Advisory Council” in 2023 (this council was created that year as part of Coinbase's efforts to address regulatory challenges).
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A BIG FRONTRUNNER HAS EMERGED IN THE RACE FOR FED CHAIR (P2)
How did markets react?
Following the Bloomberg story on Tuesday, markets have generally moved in line with what you might expect in the event of a dovish incoming Fed Chair.
Risk assets including U.S. stocks and bitcoin moved higher.
The Dollar Index (DXY) moved lower.
If this Bloomberg story was a “trial balloon” - the most important market reaction would be the Treasury market.
It’s possible the Treasury market could freak-out and sell-off (yields rise) in the event of Hassett being named - on fears of a weakening of perceived Fed independence and concerns over higher inflation risk.
This is absolutely not what the Trump team would want to see.
But any potential sell-off hasn’t appeared - the Treasury market has been well-behaved and yields are slightly lower since the story was published.
Shadow Fed Chair incoming?
We may now be approaching “shadow Fed Chair” territory.
While Powell will still be in place until May, the market may soon start to ignore the current Fed Chair - once a new one is named.
And instead take “forward guidance” from the incoming Chair - even though they would not actually be sitting in the seat.
Markets are forward-looking, and the expectation of how many rate cuts or hikes may happen in the future is a big driver of asset markets.
So, the incoming Fed Chair could have some control over “forward guidance” before actually taking up the role.
Wrapping up
It’s looking more and more likely that Kevin Hassett is set to be the pick for the top job.
Hassett is likely to be pro-growth, pro-lowering interest rates and less worried about inflation, relative to Powell.
This is generally likely to be positive for risk assets like stocks and bitcoin, and negative for the dollar relative to other currencies (DXY).
However, there may be some questions over a weakening of the Fed’s perceived independence (was it ever really truly independent?) and concerns over an “unanchored” rebound in inflation.
These fears could cause the Treasury market to sell-off strongly (yields rise) in the most extreme scenario.
That’s it for this edition - catch you in the next one.
THE INDICATORS WE’RE TRULY THANKFUL FOR 🦃
Happy Thanksgiving (and may your dinner table volatility be low).
We get it. It's tough to find reasons to be cheerful right now. The only thing that seems to be performing consistently this year is the core rate of negativity in the news cycle.
However, we’re trained to look past the noise and focus on the critical data points. And these past few weeks, we’ve been… pretty grateful.
NVIDIA’s earnings legitimized our long-term conviction that we are most definitely not in an AI bubble. Rate cuts are looking more and more likely…
2026 is shaping up to see a fresh surge of liquidity and we couldn’t be more bullish right now.
This is why we’re launching our new leg of Milk Road PRO, AI PRO in just a few weeks. It’ll focus on the "picks and shovels" of the AI revolution, showing you exactly how to invest in one of the biggest secular trends of our lives.
And right now, you can lock it in at a 40% discount. Our PRO All Access plan is 40% off until Monday at midnight and AI PRO is automatically included when it launches.
Don’t let a turkey coma keep you from securing the ultimate edge.
PS. Not ready to go all in just yet? Macro PRO is also 30% off right now.
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BITE-SIZED COOKIES FOR THE ROAD 🍪
Nvidia has been forced to send a memo to Wall Street analysts arguing it is not involved in vendor financing, a controversial practice in which suppliers invest in or extend loans to their own customers. This comes after famous short sellers - including Michael Burry of “The Big Short” fame - have attacked the chipmaker in recent weeks.
A number of big U.S. firms have announced large layoff plans recently, including HP, General Motors and Amazon. Some analysts say businesses are at a “no hire, no fire” standstill.
A gauge of U.S. regional manufacturing sector sentiment plunged to one of the lowest levels in years. The Chicago Fed’s Manufacturing survey revealed that prices paid rose, new orders fell and employment fell in the Chicago region.
Wanna invest in crypto without worrying about tax? We’ve rounded up the top crypto IRA platforms that let you do exactly that.
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