Former Goldman Sachs Executive: With Walsh as Fed Chair, the Risk of "Selling America" Is Reduced

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Fulcrum Asset Management stated that Trump's nomination of Kevin Warsh as the next Federal Reserve Chair helps to reduce the risk of a large-scale sell-off of US assets, as the outside world expects him to firmly prevent inflation.

After US President Trump announced that Warsh would succeed Powell as Fed Chair when Powell's term ends in May, the dollar immediately strengthened. Although Warsh has recently supported rate cuts, traders believe he is still more inclined to curb price pressures overall.

Gavyn Davies, co-founder and chairman of Fulcrum Asset Management, and head of the London office, said in a video published on the company's official website: "Markets, including the US dollar, will clearly breathe a sigh of relief. The choice of Warsh reduces the risk of a real ‘Sell America’ trade that might provoke a crisis."

The so-called "Sell America" theme started to gain traction around April, when Trump announced tariff hikes on trade partners, disrupting global markets and triggering simultaneous sell-offs in the dollar, US stocks, and US Treasuries.

Davies, a former chief economist and partner at Goldman Sachs, said that Warsh’s policy mix may be welcomed by market participants, but his desire to reduce the Fed’s role in the markets could mean he is less willing to intervene during stock market turmoil. "Many market observers will like this combination — a smaller balance sheet, with a more deregulated banking system."

On Friday, Trump’s nomination of Warsh as Fed Chair sparked a hawkish reaction in the market. Coupled with a surprise uptick in the US PPI inflation data that day, US equities broadly dropped, the dollar posted its largest single-day gain since last May, and precious metals plunged.

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