Hassett or the next Chair of the Federal Reserve: Markets priced in early, risks and opportunities coexist

Key Points

Economist Hassett has become a popular candidate for the next Chair of the Federal Reserve, and his obvious dovish stance suggests a more aggressive rate cut path, raising concerns in the market about the independence of the Federal Reserve.

Market Impact

After the announcement, interest rate-sensitive tech stocks and the crypto market strengthened; the dollar index came under pressure, U.S. Treasury yields fluctuated, and long-end bonds showed signs of selling pressure. In the prediction market, the probability of Hassett taking office briefly exceeded 80%.

Policy Proposals

Hassett advocates for a rate cut of 1-1.5% over the next year, has a higher tolerance for inflation, and tends to restart QE, emphasizing economic growth over price stability. He has long held a friendly attitude towards cryptocurrencies, believing that Bitcoin will "rewrite the financial system."

Core Driving Factors

Due to his policy stance aligning with Trump’s, the market worries that his appointment may undermine the independence of the Federal Reserve, making monetary policy more serve political intentions.

Trading Strategies and Risks

Focus on tech stocks, growth assets, and cryptocurrencies that benefit from low-interest rates, with the dollar showing temporary weakness.

The biggest risk is that the nomination has not yet been confirmed, and his policies may encounter resistance within the Federal Reserve.

Disputes over policy independence could trigger volatility at any time, and risk management must be prioritized.

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