Despite the significantly stronger-than-expected U.S. non-farm payrolls data in January, which prompted financial markets to scale back their 2026 Federal Reserve interest rate cut expectations from three to two, Wall Street hedge fund titan and Greenlight Capital founder David Einhorn predicts the Fed will slash benchmark rates "significantly more than twice" this year. He asserts that the market is severely underestimating the pace of future monetary policy easing. This top-tier Wall Street hedge fund manager believes that betting on more rate cuts than currently anticipated by the market is "one of the best trading theses right now."
In a media interview, Einhorn stated that the Fed "will have to cut, and it's going to be a lot more than what the market is pricing." When pressed for a specific number of cuts, Einhorn simply responded, "As many as you're hoping for." According to the latest data from the CME FedWatch Tool, interest rate futures traders currently anticipate the Fed will implement a total of two rate cuts in June and September.
The hedge fund manager identified political pressure from the Trump administration and the upcoming leadership change at the Fed as key catalysts for an aggressive rate-cutting cycle. Einhorn mentioned that Trump "believes America should have the lowest interest rates in the world" and has selected a new Fed Chair aligned with this aggressive easing vision. He expressed confidence that Trump's nominee for the next Fed Chair, Kevin Warsh, "will make some persuasive arguments that will convince members of the FOMC" to support lower rates.
Einhorn strongly dismissed concerns that a robust economy would prevent rate cuts, suggesting that under the new economic and fiscal leadership, traditional constraints may no longer apply. "He's going to argue the productivity story," Einhorn said regarding Warsh, adding that the incoming Fed Chair would posit that even with a hot economy, "we don't have to choose not to cut rates because of it."
The veteran hedge fund manager argued that AI-driven productivity gains and high corporate profit margins provide the Fed room for looser monetary policy, even amidst economic strength. He believes political pressure and potential new leadership will make the FOMC more receptive to a "productivity/AI-driven supply-side improvement" narrative, facilitating faster rate cuts even without significant labor market weakness.
To capitalize on this view, Einhorn emphasized that Greenlight Capital has established a substantial position in SOFR futures, directly betting on a more aggressive rate-cutting cycle than widely expected. He acknowledged holding this trade "for a while" and noted similar successful bets last year.
This rate-cut thesis is linked to Einhorn's broader concerns about the sustainability of the U.S. fiscal system and the increasingly prominent role of gold as a reserve asset. He criticized the current expansive fiscal policy as unjustified, pointing out that with "virtually full employment," the U.S. has a "budget deficit of close to 6% of GDP"—a level he deems unsustainable and near cycle highs historically.
Einhorn stated that gold has already "become a reserve asset held by central banks globally," contributing to its significant price appreciation in recent years. He added that other major world currencies are "as bad as or worse than the U.S. dollar." Spot gold prices rose nearly 70% throughout 2025 and are up 17% year-to-date, despite previous declines.
Echoing Einhorn's view, other Wall Street financial giants remain bullish on gold's long-term prospects amid a weakening U.S. dollar trend, expanding developed market debt, and persistent geopolitical tensions. Deutsche Bank, J.P. Morgan, and Bank of America maintain that gold could surge to $6,000 by the end of 2026.
A Fed led by Warsh may not be as "hawkish" as the market anticipates. According to Einhorn and other Wall Street figures, the market's reaction to the news of the historically hawkish Warsh's appointment has been exaggerated, misjudging his actual monetary policy stance. A survey of economists shows most expect the Fed to hold steady during the remainder of Powell's term, potentially announcing a rate cut in June after Warsh takes office. They anticipate Warsh is more likely to set policy too loose rather than too tight.
Steven Major, a seasoned Wall Street veteran and global macro strategy consultant at Tradition Dubai, recently suggested in an interview that a Fed under Kevin Warsh could cut rates far more than the market expects. Goldman Sachs recently published a report stating that judging Warsh's policy orientation solely on his hawkish comments during his previous tenure as a Fed Governor is mistaken. Goldman's strategists noted, "In our view, at a minimum, a willingness to ease was a prerequisite for him getting the job." The firm emphasized that markets often habitually misread a new Fed Chair's initial policy stance, citing significant "market sell-off misinterpretations" in the first year of recent nominees—suggesting investors are experiencing another cycle of misjudgment and need time to adapt to the new Chair's communication style.
Major stressed in his interview that unless Warsh was part of the rate-cutting camp, he would not have been considered for the central bank leadership role, and the possibility exists for four or five cuts instead of the two currently priced in by the market. "I think a reasonable assumption is that unless he was in the camp of cutting rates, he wouldn't have been considered by Trump himself for the role," Major said in a Tuesday interview. "The market is pricing in two cuts, but I would expect maybe four or five, not just two."
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