Trump on Warsh’s Independence and Potential Iran Timing
Uncertainty remains in play and that is likely to spur our portfolio discipline.
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In an interview with President Trump published today in The Washington Examiner, the paper pointed out that investors are now pegging a higher chance of an interest rate hike rather than a cut by the end of the year. As of earlier this morning, per the CME FedWatch Tool, the implied odds of a rate cut before the end of the year are just 0.5%, while the odds of a rate increase have risen to about 55%.
Trump’s response was the following:
“I’m going to let him do what he wants to do… He’s a very talented guy, he’s going to be fine, he’s going to do a good job.”
Not surprising given that Kevin Warsh was Trump’s pick, but we’ve seen the president alter his view as circumstances change. Does this mean the new Fed Chair could feel Trump’s bite in the coming months?
Quite possible.
The thing is, the root causes of renewed inflation pressures we’re seeing, and consumers are starting to feel stem from Trump’s tariffs and the Iran war. And the outlook for those pressures, especially the ones tied to the war and the Strait of Hormuz being closed, is for them to continue.
Earlier this morning, we discussed the reported “latest” peace proposal from Iran, but now we’re reading indications for a potential new wave of U.S. attacks as negotiations on a deal to end the war remain at a standstill.
In comments made today, Trump was unclear about a timeline for Iran to agree to a deal or face the consequences despite comments from the president that “we may have to give them another big hit”:
“I’m saying maybe two or three days. Maybe Friday, Saturday, Sunday, something. Maybe early next week. A limited period of time, because we can’t let them have a nuclear weapon.”
More uncertainty for the market to chew on. Given the differences between the U.S. and Iran on Iran’s nuclear capabilities and the continued focus on that topic, we’re looking at a game of chicken that could devolve into renewed escalation in the conflict.
In response, we’ll continue to walk a cautious path, including sticking with our portfolio discipline when it comes to positions that are or have bumped up against a 4.5% position size.
