Kevin Wash may succeed as Federal Reserve Chair; US stocks are expected to see positive gains

The Federal Reserve chose to hold steady at its January monetary policy meeting this year, and market attention has shifted to Kevin. Woor’s nomination as the new Fed Chair. It is still too early to determine whether Kevin. Woor’s policy stance will lean dovish or hawkish. The current Fed Chair Jerome Powell’s term will end in May, and the market generally expects the earliest possible rate cut to occur at the June monetary policy meeting.

As the current internal dove within the Fed, Milan, a Fed Board member appointed by U.S. President Trump, is very eager to see how Kevin. Woor performs as Fed Chair. At the January monetary policy meeting, Milan voted against the decision, believing the Fed should cut rates by 25 basis points.

Regarding the future direction of Fed monetary policy, Huatai Securities analysts believe that if Kevin. Woor becomes Fed Chair, he may attempt to push a policy combination of “rate cuts and balance sheet reduction.” Specifically, in terms of interest rates, Kevin. Woor believes that the productivity gains brought by artificial intelligence (AI) will suppress inflation, and if the Fed can significantly shrink its balance sheet, it will also reduce inflationary pressures, thus opening room for rate cuts.

From the perspective of the balance sheet, Kevin. Woor has long criticized the Fed’s maintenance of a large balance sheet, which distorts markets and affects fiscal sustainability. He hopes to reduce the balance sheet more aggressively and stop purchasing assets like MBS. Regarding policy sequencing, Huatai Securities suggests that Kevin. Woor might first push for rate cuts and then attempt to shrink the balance sheet, though balance sheet reduction could trigger excessive market reactions. Considering the Trump administration’s relatively protective stance toward capital markets, market volatility could constrain Kevin. Woor’s decision-making.

In addition to potential changes in the Fed’s monetary policy path, how Kevin. Woor’s appointment will impact financial markets is also highly watched. Wellington Management macro strategist Zhu Xi. Dawan believes that Kevin. Woor has consistently advocated for a “hardline monetary policy” throughout his career. If he becomes Fed Chair, it could somewhat ease market concerns that inflation management is being sacrificed for political priorities. Based on this, markets are more inclined to believe that monetary policy will be driven by economic data rather than political considerations, which from the perspective of preventing currency devaluation, helps stabilize the dollar.

“Kevin. Woor is a pragmatic and politically astute individual. With his communication skills and valuable market experience accumulated during his tenure at the Fed, he will have an advantage in the role, especially when facing complex issues like the U.S. deficit and debt. He will need to carefully balance between a more aggressive president, a more hawkish Congress, and highly vigilant markets. He has demonstrated the ability to adjust his views flexibly in the past, which will be especially important in the future, particularly if the large U.S. fiscal deficit puts pressure on bond yields, requiring quick responses. For Kevin. Woor, one should expect ‘unconventional moves,’ including measures that may not be ‘ideal’ when necessary,” Zhu Xi. Dawan said.

Swiss Pictet Wealth Management noted that amid the increased challenges to the Fed’s independence early this year, nominating a relatively traditional, previously hawkish former Fed official could help stabilize market sentiment. After the announcement, U.S. Treasury yields slightly steepened, and the dollar strengthened in the short term. For U.S. stocks, this nomination has a neutral impact. Concerns that “policy will no longer be excessively accommodative” may be offset by positive expectations that “the Fed’s independence will be reinforced.”

“Initially, financial markets interpreted Kevin. Woor’s nomination as hawkish. However, in the medium to long term, we believe Kevin. Woor may not be as hawkish as the market currently expects or as his past actions suggest. His policy background and experience at the Fed will help maintain the Fed’s independence and financial system stability, support inflation expectations, and keep borrowing costs manageable. His private sector experience could also promote further deregulation of banking, aiding credit expansion and U.S. economic growth. We believe that if Kevin. Woor becomes Fed Chair, a Fed that is politically independent and market-friendly would be positive for the stock market,” said Brian Leavitt, Chief Global Market Strategist at Invesco.

It is worth noting that although markets have begun to focus on the potential impacts of Kevin. Woor’s appointment, he still faces the hurdle of the Senate. Trump’s nomination of Kevin. Woor requires Senate approval. However, Trump’s investigations and accusations against Powell could influence the Senate’s confirmation process for Kevin. Woor. On January 30, Senate Democratic Leader Chuck Schumer stated that if Trump continues to “retaliate” against the Fed by using judicial means against Powell and another Fed Board member, Lisa Cook, the Republican-controlled Senate would be unable to confirm Trump’s nomination of Kevin. Woor.