Fulcrum Asset Management stated that nominating Kevin Warsh as the next Federal Reserve Chair reduces the risk of a large-scale sell-off of US assets, as the new leader is expected to take measures to address inflation. Following Trump's appointment of Warsh to succeed Jerome Powell, whose term ends in May, the US dollar strengthened. Although Warsh has recently supported interest rate cuts, traders believe he ultimately leans towards curbing price pressures. "The market will breathe a huge sigh of relief, and so will the dollar market," said Gavyn Davies, co-founder and chairman of the London-based firm, in a video posted on Fulcrum's website, adding that choosing Warsh reduces the risk of a "crisis-tinged 'sell America' trade." The "'sell America' theme gained traction around last April when Trump announced tariffs on trade partners, shocking global markets and triggering simultaneous declines in the US dollar, US stocks, and US bonds. Davies, a former chief economist and partner at Goldman Sachs, said market participants are likely to view Warsh's policy mix positively, although his desire to reduce the Fed's influence on markets suggests he may be less inclined to intervene during periods of market turbulence. Davies stated, "Many market observers would favor this policy combination: a smaller balance sheet but more relaxed regulation of the banking system."
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