Why Did Trump Pick Warsh, the Hawk?

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On Friday, Silver was down a whopping 30%. Gold was also cratering.

My first thought: what is going on?

Then I saw the headline: Trump had named Kevin Warsh as his pick to replace Jerome Powell as Fed Chair.

Hmmm, wasn’t the new FED supposed to help the case for metals?

Then I learned that Warsh is considered a hawk (A “hawkish” Fed means it favors tightening monetary policy to fight inflation, primarily by raising interest rates, even if it slows economic growth or employment).

Wait.

This is the same Trump who has been demanding aggressive rate cuts.

The same Trump who publicly attacked Powell over and over for not cutting fast enough.

The same Trump whose DOJ launched an unprecedented criminal investigation into the sitting Fed Chair.

And after all that... he picked the hawk?

That’s the question I want to explore today.

Everyone Expected A Dove

To appreciate why this pick was so surprising, you need to understand what the market was expecting.

For months, Kevin Hassett, Trump’s National Economic Council Director, was the frontrunner.

At one point, Hassett had > 80% probability on prediction markets.

He had publicly called for a half-point rate cut.

He was, by all accounts, the most dovish option on the shortlist.

And Trump wasn’t being subtle about what he wanted: He had made lower rates a literal litmus test for the next Fed Chair.

The market took Trump at his word.

Gold blew past $5,000 an ounce.

Silver surged above $100.

The thesis was: If Trump installs a dovish puppet at the Fed, you get aggressive rate cuts regardless of inflation, the dollar gets debased, and hard assets like gold and silver become the ultimate hedge.

Then came the DOJ investigation into Powell.

To open a criminal probe into the sitting Fed Chair, that was unprecedented.

Everything pointed to Trump picking the most compliant candidate he could find.

But he didn’t.

He picked the candidate the market viewed as the most independent and hawkish of the finalists.

Why would he do that?

Theory 1: Only A Hawk Can Make Peace

There’s a well-known principle in politics: only a hawk can make peace.

Nixon was uniquely positioned to open relations with China precisely because no one could accuse him of being soft.

The same logic may apply here.

Evercore’s Krishna Guha made an interesting point after the announcement:

Because Warsh has a hawkish reputation and is seen as independent, he’s actually better positioned to deliver rate cuts than a candidate seen as too close to the White House.

Why? Because of the bond market.

If Hassett had walked in on day one and pushed for aggressive cuts, here’s what may have happened:

• Resistance from other Fed governors

• The bond market would have revolted, pricing in inflation risk

• Long-term interest rates would have spiked

Trump would have gotten the exact opposite of what he wanted

We’ve learned from the Tariff selloff of 2025 that when markets lose confidence in policy credibility, it punishes you fast.

So you can’t just bully your way to lower rates, the bond market has to cooperate.

Warsh may just solve this problem.

He can walk into the Fed with credibility.

He can argue for rate cuts and be believed, not because the President wants it, but because, in his independent judgment, the economy needs it.

Theory 2: The Senate Forced His Hand

This one is more mundane, but important.

Senator Thom Tillis has vowed to block ALL Fed nominees until the DOJ investigation into Powell is resolved.

Senate Majority Leader Thune acknowledged that without Tillis’s support, Warsh “probably” couldn’t win confirmation.

If even the most credible candidate on the shortlist is going to have a tough confirmation fight, imagine what Hassett would have faced.

Hassett would have been painted as a political puppet.

The confirmation hearings would have become a spectacle about Fed independence, exactly the kind of attention Trump doesn’t want.

Theory 3: Maybe It’s Simpler Than We Think

Warsh is well-connected in the right circles.

Warsh’s father-in-law is Ronald Lauder, heir to the Estée Lauder fortune and a longtime Trump donor and confidant.

Trump clearly cares deeply about how people look in a role. Warsh is polished, well-spoken, and looks like what a Fed Chair “should” look like.

Trump called Warsh “central casting.”

And Warsh has already been telling Trump what he wanted to hear.

He’d been publicly criticizing Powell for not cutting rates enough.

He wrote a Wall Street Journal op-ed arguing the Fed should be more optimistic about the economy.

He had repositioned himself from his old hawkish stance to something much more aligned with what the President wanted.

More recently, Warsh has been publicly critical of Powell’s approach at the Fed. According to Al-Jazeera, Warsh has also argued for lower rates, unlike his previous position.

Theory 4: Regime Change At The Fed

There’s one more angle worth mentioning.

Bessent has been vocal about wanting to rethink the Fed’s entire mission.

He’s talked about simplifying monetary policy, restructuring the role of regional Fed presidents, and pulling the institution back from what he sees as scope creep, things like climate mandates and social objectives.

Warsh has also called for “regime change” at the Fed.

The administration may care as much about reshaping the institution itself as they do about the near-term rate path.

And for that kind of overhaul, you need someone with institutional credibility, someone who understands the Fed from the inside.

Warsh can be both.

Will Warsh Stay Independent?

Warsh has already been shifting his views to align with Trump’s.

Is that just smart positioning to get the job? Or is it a preview of how he’ll govern?

Whether Warsh turns out to be truly independent or just a more polished version of what markets feared, that’s the question that will define monetary policy for the next few years.

Question: Do you think Trump made a smart pick?

I’d love to hear your thoughts.

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Disclaimer: This is not Financial Advice, of course…