Trump has basically locked in long-term advisor and current Director of the National Economic Council, Kevin Hassett, as the next Federal Reserve Chairman candidate. This popular candidate, who stands out for his absolute loyalty to Trump and clear dovish stance, is causing global markets to fall into a complex mix of 'rate cut frenzy' and 'independence anxiety,' with various asset prices already stirring up waves of volatility in advance.
Market sentiment: Rate cut bets are boiling, independence concerns are hidden.
Optimistic expectations dominate the market narrative, with Hassett's nomination probability reaching as high as 74% (Polymarket data), prompting investors to bet wildly on easing. He has publicly stated multiple times that 'if he takes charge of the Federal Reserve, he will immediately cut rates,' advocating for reducing the current interest rate of 3.75%-4.0% to below 3%. This statement aligns closely with Trump's demand for 'rate cuts not happening fast enough,' directly igniting market expectations for low-cost credit.
Concerns over the independence of the Federal Reserve have never ceased as worries spread. Hassett and Trump have repeatedly criticized the Federal Reserve for being 'partisan' this year, and his status as a 'core advisor in the White House' has led the market to question whether central bank decisions might become politically subservient. The continuous weakening of the dollar is a direct manifestation of these concerns.
The conflicting mindset is particularly evident, as investors yearn for asset appreciation brought by interest rate cuts while being wary of the inflation rebound and policy stability risks caused by excessive easing. This contradictory sentiment has significantly amplified market volatility.
Market changes: Asset prices are 'lining up' in advance, and expectations for policy shifts have become the core driver.
The fixed income market reacted first, with the U.S. ten-year Treasury yield dropping below 4%. The demand for Treasury auctions strengthened, confirming the market's firm bet on falling interest rates, and expectations for medium- to long-term credit rates, such as mortgage and auto loan rates, are also declining.
The equity market and foreign exchange market are showing divergence. U.S. stocks are fluctuating upwards on interest rate cut expectations, while the dollar index continues to be under pressure, breaking through key levels, and currencies such as the renminbi are strengthening accordingly, with funds beginning to shift towards high-yield assets.
Volatility in niche markets has intensified. The cryptocurrency market has been repeatedly shaken by rumors of 'Powell's resignation' and expectations of a new chairman. Over 500 million dollars in contracts were liquidated within 24 hours across the network, highlighting the market's sensitivity to policy shifts.
Investment banks collectively adjusted expectations, with major institutions like Bank of America and Goldman Sachs raising the probability of a rate cut in December. Bank of America even revised its prediction to forecast a 25 basis point rate cut by the Federal Reserve next week, followed by two more cuts next year, indicating that the pace of policy easing has been front-loaded by the market.
Future highlights: Nomination finalization and policy balancing act.
Hassett has clearly stated, 'If nominated, I will gladly accept.' Trump is likely to announce his decision before Christmas, and the Senate confirmation process may proceed smoothly due to a neutral stance. Currently, the market is most concerned about whether this candidate, labeled as a 'disguised moderate pro-Trump,' can find a balance between catering to Trump's demand for interest rate cuts and maintaining the Federal Reserve's apparent independence — both fulfilling the promise of 'cheaper credit' and avoiding extreme policy that could trigger a market backlash.
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