Reider's jump to front runner in the Fed chair race is surprising, but his long held views show that he is the candidate most suited to a fiscal dominant world. Reider has a long career in asset management and is political outsider without obvious ties to Trump. He makes the standard arguments for rate cuts to 3% by highlighting weakness in labor market and increases in productivity, but has thoughtful views on the role of […]
The President is poised to announce his pick for Fed Chairman as soon as this week and Kevin Warsh is now the leading contender. Warsh is a former Fed governor and noted hawk, but his views on Fed policy align with that of Secretary Bessent. Warsh is most notable for his long time quest to shrink the Fed's balance sheet. His argument for more rate cuts rests on an AI productivity boom, and the tightening […]
The Administration's willingness to conscript the Government Sponsored Enterprises in its efforts to lower mortgage rates opens up a range of possibilities that directly impact markets and the economy. Fannie and Freddie Mac once held enormous mortgage portfolios that shrank in the wake of the 2008 crisis and could be rebuilt. The Federal Home Loan Banks are a trillion dollar system that could also be more effectively deployed to provide home financing. These efforts imply […]
The economy enters 2026 with the support of a large influx of bank credit that suggests another year of strong economic growth. Bank credit growth has been weak the past two years amidst the historically aggressive rate hike cycle, but surged in 2025 with notable acceleration in the final quarter. While the bulk of credit is flowing to non-bank financial institutions, the end user is ultimately someone in the real economy. Overall credit quality remains […]
The market is underpricing the potential for President Trump to get more Fed cuts. Short term interest rate futures have consistently priced the trough of the cutting cycle at around 3%, regardless of Trump's aggressive demands or the weakening labor market. Market participants appear anchored to the median neutral rate of the Powell Fed even as there is significant reason to think the Trump Fed would have a different view. A 2.5% trough is a […]
A politicized Fed is unlikely to lead to higher yields because longer dated yields are becoming more connected to the expected path of Fed policy. Even without a new Chair, the Fed's party line has quietly shifted towards that of a productivity boom in line with the Administration. Powell's emphasis on employment and dismissal of inflation as transitory opens the door to deep cuts next year. Regulatory changes are tightening arbitrage relationships between Treasuries and […]
