GM. This is Milk Road Macro, the newsletter that's tracking the Fed Chair race like it's the Kentucky Derby, with less horses, more interest rates, and way more market impact.
Here’s what we got for you today:
- ✍️ Everything you need to know about the race to become Fed Chair
- 🎙️ The Milk Road Macro Show: Bear Trap, Bull Run, or Blow Off Top? Where Is The Market Going Next w/ Yann Allemann
- 🍪 Amazon signed a $38B cloud deal with OpenAI
Consensus Miami is the largest conference that covers all sides of crypto & web3. Grab your tickets now before prices rise.
Prices as of 8:00 AM ET.
EVERYTHING YOU NEED TO KNOW ABOUT THE RACE TO BECOME FED CHAIR
Jerome Powell will be out as Chair of the Federal Reserve in May 2026 when his term ends.
And it’ll be President Trump deciding who’ll be the next person in.
This could be one of the most important decisions made by anyone, anywhere, concerning what asset markets might do next.
So, what’s the latest?
Treasury Secretary Scott Bessent is tasked with the interview process - and the race is currently heating up.
A second round of interviews is reportedly due to take place in the coming weeks.
There’s still no clear frontrunner.
But it now appears there are four candidates gaining ground.
It’s currently expected that Trump will be handed a shortlist between Thanksgiving and Christmas.
So, who are the four main candidates?
What are the latest odds?
And what does it all mean for asset markets?
Let’s take a look…
So, who are the four main candidates?
1/ Kevin Hassett, currently head of Trump’s National Economic Council, is one of the top favorites.
He has some Federal Reserve experience, and is a big Trump ally - often seen on television shows defending the Trump administration’s policies.
2/ Christopher Waller, who is currently a Fed Governor, is also a hotly fancied pick.
Waller has worked at the Fed for more than a decade, and he’s been particularly dovish in recent months, sitting at the vanguard of pushing for the central bank to lower interest rates.
3/ Kevin Warsh, currently a Fellow at the Hoover Institution (an economics think tank affiliated with Stanford University), is also in the running.
Warsh is a former Fed Governor and he lost out against current Fed Chair Jerome Powell in the race for the top job in 2017.
But Warsh is thought of as quite hawkish overall, which would seem to not be in keeping with what Trump is looking for.
4/ Rick Rieder, currently Senior Managing Director at BlackRock, is an unconventional choice, but he has appeared to crop up as a dark horse in the past month or so.
Rieder has never formally worked at the Fed, but he would be the candidate with the most “market savvy” experience, having worked in investment-related roles for decades, and he currently manages roughly $2.4 trillion in assets for BlackRock.
THE SUPER BOWL OF BLOCKCHAIN
Most crypto conferences feel the same… but this one’s different.
Consensus Miami brings together both the web3 and AI worlds under one roof.
Here’s why it’s worth checking out:
- Over 20,000 industry leaders will be attending
- It’s the ultimate intersection of crypto and AI
- It’s happening in Miami (you’re bound to have a good time)
And here’s the best part:
Using code MILKROAD will get you a 20% discount on your tickets.
Grab yours now, before prices rise.
EVERYTHING YOU NEED TO KNOW ABOUT THE RACE TO BECOME FED CHAIR (P2)
What are the latest betting market odds?
Kevin Hassett has recently become the favorite - sitting at 36% on Polymarket.
He has overtaken Christopher Waller (18%), who was previously the favorite.
Kevin Warsh (17%) and Rick Rieder (11%) make up the remaining “top four” candidates.
What does it all mean for asset markets?
Unsurprisingly, all four of the candidates have made it known that they are in favor of big interest rate cuts.
Trump has not been shy about his eagerness for rates to be lowered.
The President explicitly said: “I’m going to put somebody [in] that wants to cut rates.”
So, it’s pretty simple - you’re only in if you promise to cut rates.
The next Fed Chair will very likely lean towards a dovish, growth-friendly agenda regarding rates.
This is likely good news for risk asset markets generally over the medium-term.
However, Treasury Secretary Bessent (who is in charge of compiling the shortlist) also wants to “rein in” the mass purchases of Government debt (Quantitative Easing, or “QE”) the Fed has carried out since the 2008 Great Financial Crisis.
Most of the candidates share Bessent’s view that QE is best suited to fighting crises and should not form part of its normal policy arsenal.
This is not necessarily bad news for risk asset markets - but some people are expecting the new Fed Chair’s dovishness to extend to restarting a big QE program, and this seems unlikely.
Bessent also wants the central bank to be much less active in managing the economy.
A lot of the candidates subscribe to Bessent’s opinion that the Fed has hogged too much of the limelight in recent years, and they think central bankers should speak less and hold fewer press conferences.
Aditi Sahasrabuddhe, assistant professor at Brown University, said:
“What’s striking is how much some of the candidates are talking about revamping the Fed’s Governance structure and shifting to a smaller and less active central bank. Bessent seems to have steered the conversation beyond Trump’s calls for lower interest rates and is more focused on reforming how the Fed does their job.”
Wrapping up
There’s still no clear frontrunner - but it’s possible we might have a name soon, maybe even before the end of the year.
All the favored candidates appear to be particularly dovish on interest rates - good news for asset markets generally.
But they all appear to be somewhat hawkish on using the Fed’s balance sheet to juice the economy, absent a crisis.
It’s still all to play for - but Kevin Hassett has gained a boost of momentum in recent weeks.
He’s a staunch Trump ally, and is probably the most likely of the four candidates to attempt to please the President.
The other three may be more willing to fight back against Trump’s views.
That’s it for this edition - catch you in the next one.
IS THIS A MELT-UP OR A TRAP? 📈
In today’s episode, we sat down with Yann Allemann to talk about where the markets might be headed next: melt-up, blow-off top, or something else entirely.
Take a look at what surprised us:
- Why asset prices are surging even as the real economy slows down
- How Bitcoin is undergoing a “silent IPO” from OG holders to institutions
- Why liquidity, not price, is the key metric to watch
- The Fed’s messy pivot and what it really means for markets
Don’t sleep on this one 👇
YouTube | Spotify | Apple Podcasts
Walrus is making blockchains faster, cheaper and more secure. Click here to learn more about Walrus.
Bridge helps businesses send, store, accept, and launch stablecoins instantly. Learn how Bridge is powering stablecoin-backed money movement.
Want yield strategies that feel like they're passive, but deliver like they're active? Check out EarnPark!
BITE-SIZED COOKIES FOR THE ROAD 🍪
Wall Street CEOs said investors should brace for a market drop due to “challenging valuations”. The S&P 500 index is currently trading at 23 times forward earnings estimates, slightly above its five-year average of 20 times.
It’s not just the US and China engaged in a trade spat - China and the Netherlands are also squabbling. China has accused the EU nation of not working with Beijing to resolve a dispute surrounding the Dutch Government’s seizure of chipmaker Nexperia.
Amazon signed a $38bn cloud deal with OpenAI, showing the e-commerce giant is getting serious about AI. Amazon was considered a laggard in the AI race by many investors because it was late to launch a flagship large language model and failed to offer a consumer-facing chatbot.
MILKY MEME 🤣
ROADIE REVIEW OF THE DAY 🥛
