Federal Reserve Policy & Independence - Market anticipates the next Fed chair to be dovish, evidenced by record futures wagers [1] - Concerns exist regarding potential pressure on the Fed to lower rates due to geopolitical tensions and presidential influence [1][3] - Appointing a "shadow Fed chair" is viewed as unwise and could steepen the yield curve [2] - Questioning Fed independence could negatively impact markets, potentially leading to a dollar sell-off and yield curve steepening [4] - Maintaining Fed independence is crucial, and candidates for Fed chair are expected to uphold this principle [6][10] - A hypothetical 200 basis point (2%) rate cut, as suggested by the president, could have the opposite effect on the Treasury curve [7][8] Geopolitical Risk & Market Impact - A hypothetical scenario involving a limited military action in Iran could initially cause oil prices to rise and stocks to fall, but a swift resolution could be bullish [14][15] - A protracted war involving the U S in Iran would be categorically bearish for markets [15] Market Dynamics & Crypto - The stock market's resilience is attributed to low unemployment, strong retail participation, and infrastructure spending [18] - Institutions are increasingly entering the crypto market, signaling a significant shift [21] - Anticipation of a Stablecoin bill and a market structure bill is expected to bring legitimacy to the crypto space [22] - Tokenized equities and perpetual futures are emerging trends in both crypto and traditional finance [22]

Fed Chair Succession Speculation - Market views Powell's potential successor, possibly Bessen, with caution due to perceived loyalty to Trump and potential for earlier Fed rate cuts [1][2] - Trump's desire to influence Fed policy is driving speculation about a successor to Powell before May 2026 [2][3] Fed Independence Concerns - The market is questioning the definition of Fed independence, considering political affiliations of potential candidates [4] - Naming a successor early could undermine Powell's role and raise questions about his ability to complete his term until May 2026 [3][5] Potential Candidates - Besides Bessen, Kevin Warsh and Kevin Hassett are also being considered as potential candidates [2]

ISSUE 139 | May 15, 2025 | 11:35 AM EDT FED INDEPENDENCE: HOW CONCERNING? President Trump's public criticism of the Fed and, more importantly, his attempts to turn words into action by setting in motion a challenge to the landmark ruling that has prevented presidents from removing officials of independent agencies without cause have raised serious concerns about Fed independence. We talk to former Fed Vice Chair Richard Clarida, the Hoover Institution's John Cochrane, and GS' Jan Hatzius and Joseph Briggs, ...