WSJ: Stocks, Bonds, and Metals Tell Trump: Maybe Warsh Isn’t

WSJ: Stocks, Bonds, and Metals Tell Trump: Maybe Warsh Isn’t the Guy You Really Wanted

A meltdown in global metals markets, a sharp pullback in U.S. stocks, and the ongoing collapse of Bitcoin
BTCUSD
+1.12%
 prices suggest President Donald Trump may not be getting the kind of Federal Reserve chair he’d hoped for when choosing Kevin Warsh to lead the central bank.

Trump’s decision to go with Warsh, following months of interviews with a host of candidates and the late emergence of BlackRock’s Rick Rieder as a potential contender, has triggered a global reset in risk assets that suggest U.S. interest rates will remain higher for longer into the summer months and beyond.That’s likely to test the stock market’s ability to set fresh highs over the coming weeks as investors adjust to both the selloff in global metals, a modestly firmer dollar, and the expected uptick in longer-term Treasury bond yields tied to Warsh’s view on trimming the Fed’s $6.6 trillion balance sheet.

In short, it’s almost exactly what the president didn’t want from his new Fed chair.

“While his views differ in some respects from the current Fed consensus, in particular when it comes to the use of the balance sheet, Warsh is very much part of the U.S. financial establishment,” said Jonas Goltermann, deputy chief markets economist at Capital Economics.

“Along with the sustained pushback against the Trump administration’s efforts to influence the Fed from both financial market participants and Congress,” he added. “That may alleviate some of the worst fears around the Fed’s independence and the broader direction of U.S. policy.”The immediate reaction, however, indicates investors are bracing themselves for higher capital costs, be it in terms of the Fed’s key lending rate or U.S. Treasury bond yields, under Warsh’s tenure.

That, in part, is leading the massive selloff in gold
GC00
+4.84%
, which suffered its biggest single-day decline since the global financial crisis on Friday and now trades some 13% south of the all-time high it reached in late January.

Silver 
SI00
+10.73%
, copper 
HG00
+1.65%
, and other commodities prices are also in free fall, with the white metal now some 30% off its record peak early Monday.The liquidation has stocks set for a sharp opening bell decline Monday, as well, with the S&P 500 
SPX
+0.54%
on pace to fall 40 points or more from Friday’s close.

Stocks had a solid but by no means spectacular gain in January of around 1.37%, but all of that advance came in the first two weeks of the month. Market reaction to both bank and big tech earnings was largely muted, with the benchmark slipping 0.55% since JPMorgan Chase kicked off the fourth-quarter reporting season on Jan. 13.

Analysts still expect corporate earnings growth of around 15% this year, but a Warsh-led Fed might not provide one of the key tailwinds—in the form of lower interest rates—that investors had been relying on in their projections.

That’s even more true now that inflation readings are starting to reaccelerate and the economy continues to outperform forecasts on the back of billions in artificial-intelligence infrastructure investments and the fiscal stimulus tied to the One Big Beautiful Bill Act.  Midterm elections are also starting to influence investor sentiment, with betting markets such as Kalshi and Polymarket assigning an 80% chance that Democrats will retake control of the House. That could blunt the impact of the OBBBA if investors feel some of its deficit-busting components could be watered down or reversed under a new Congress.

“The historical playbook reminds us that midterm election years have been the weakest in the presidential cycle over time,” said Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets. “If Democrats do take back control of the House or continue to look poised to do so, we do expect a short-term worry trade in the stock market to take hold at some point in 2026.”

Higher bond yields, a weaker stock market, and potentially faster inflation is definitely not the mix the president wants to see taking hold this fall.