The Federal Reserve's Interest Rate Dilemma Is About to Go From Bad to Warsh -- and the Stock Market May End Up Paying the Price

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• The stock market began 2026 at its second-priciest valuation over the last 155 years

  60% confidence

• Major geopolitical events since WWII show markets up a median of 5% six months later; all of them felt really bad at the time

  60% confidence

• The Iran war resulted in Iran shutting down the Strait of Hormuz to virtually all oil exports; the roughly two-month shipping disturbance represents the largest energy supply disruption in modern history

  60% confidence

• Kevin Warsh has made clear that he believes the Fed should be a passive market participant, which would entail selling a significant portion of the central bank's assets

  60% confidence

• One of the main reasons investors have supported such an expensive stock market is the belief that the FOMC would further cut interest rates in 2026

  60% confidence

• If Trump wants someone easy on inflation, he got the wrong guy in Kevin Warsh

  60% confidence

• Stock Advisor's total average return is 967% — a market-crushing outperformance compared to 199% for the S&P 500

  60% confidence

• While Wall Street and President Trump are both hoping for additional interest rate cuts from a Warsh-led Fed, history suggests this is unlikely

  60% confidence

• Energy price shocks are rarely short-term events; even if the Iran war resolves relatively soon, the inflationary effects of a two-month or greater crude oil supply disruption will be felt for several quarters

  60% confidence

• If Warsh sells long-term Treasuries and mortgage-backed securities en masse, the expected reaction would be lower bond prices and higher yields — higher lending rates, the exact opposite of what Trump and investors hope for

  60% confidence

• Kevin Warsh's voting record and commentary point to a hawkish approach; he favored higher interest rates to suppress inflation even as the unemployment rate soared during the Great Recession

  60% confidence

• Warsh's historically hawkish voting record and desire to reduce the Fed's bloated balance sheet strongly suggest that he would not be in favor of continuing the central bank's existing rate-easing cycle

  60% confidence

• If U.S. inflation nears 3.6% in April and continues to trend modestly higher, Warsh may push for higher interest rates, setting him on a public collision course with President Trump and Wall Street

  60% confidence

• The Cleveland Fed's Inflation Nowcasting tool forecasts April 2026 TTM inflation at 3.58% as of April 20, 2026

  60% confidence

• Trump repeatedly urged Powell and members of the FOMC to aggressively cut interest rates to 1% or lower

  60% confidence

• Trump's actions in Iran, coupled with a shift to Kevin Warsh as Fed chair, all but remove the possibility of rate cuts from the equation in 2026

  60% confidence

• Among geopolitical and major events, those involving oil price shocks have been more likely to trigger steep corrections, bear markets, or even crashes in the Dow, S&P 500, and Nasdaq Composite dating back to 1940

  60% confidence

Data points we hold from this source

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