Trump's Kevin Warsh Nomination Changes Nothing: Economist Says Debt Monetization Has 'Further To Run,' Debasement Trade Is 'Very Much Intact' - State Street SPDR S&P 500 ETF Trust (ARCA:SPY)

Core Viewpoint - The nomination of Kevin Warsh to lead the Federal Reserve will not alter the ongoing global "debasement trade," as increasing public debt necessitates the monetization of U.S. fiscal deficits [1] Fiscal Reality - Despite a significant drop in precious metals prices, the fundamental drivers for their rally remain intact, with the market's search for safe havens being influenced by an unsustainable fiscal trajectory [2] - The nomination of Warsh does not change the underlying fiscal issues, which are characterized as a "reckless path" of fiscal policy [2] Public Debt and Market Signals - Rising public debt is leading to increased long-term yields, which will intensify political pressure on the Fed to lower interest rates and cap these yields [3] - Following Warsh's nomination, Treasury yields decreased, and futures prices indicated expectations for additional rate cuts, suggesting a market belief that Warsh will adopt a dovish stance on interest rates, benefiting hard assets [3] Political Influence on Fed Policy - The political dynamics of the incoming administration are expected to have a greater impact on Fed policy than individual ideologies, with potential risks for Warsh if he does not align with political expectations [4] Temporary Correction in Precious Metals - The recent volatility in silver and gold is viewed as a minor correction rather than a reversal of trends, as the price drop merely returns metals to levels seen weeks prior [4] - The "debasement trade," which reflects market behavior seeking safe havens from debt monetization, is expected to continue regardless of who leads the Fed [5] Benchmark Indices Performance - The top U.S. indices experienced mixed results, with the S&P 500 rising by 0.23% over the past week, while the Nasdaq Composite and Dow Jones indices fell by 0.29% and 0.50%, respectively [5]