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The Full Picture
A Rate Decision Followed by a Chair Decision.
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The Federal Open Market Committee meets Wednesday and Thursday. Fed funds futures price the probability of a rate cut at under 10%, so the press conference matters more than the decision. The harder story is the chair seat: Powell’s term ends in May 2026, and the administration intends to install a successor on its own terms.
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Kevin Warsh, Kevin Hassett, and Christopher Waller are the short-list names. Each carries a distinct policy preference and would shift the front of the curve in a different direction on the day they are confirmed. The Financial Times this morning ran an opinion piece titled “Our pension funds are not quasi-government money” — the framing is not subtle.
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What the Curve Already Knows.
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The two-year Treasury yield closed Friday at 3.71%. Ten-year notes sat at 4.18%. That spread has widened by 22 basis points over three weeks — a steepening curve in this configuration is the bond market’s way of saying it expects easier policy at the front and looser fiscal discipline at the back.
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Gold sat at $3,840 an ounce Friday, up roughly 14% year-to-date. The dollar index slipped under 99 the same session. Both moves point to the same thing: the market is hedging against a less independent Fed before the chair seat is filled.
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Partner Perspective
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Track record on Fed-driven trades: 62% when the Fed cut rates in 2020. 117% in under a month after the January 2022 rate-hike signal. 89% in 17 days after Powell’s Jackson Hole speech.
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Three Things to Watch Over the Next Ten Days.
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First, the dot plot. Wednesday’s Summary of Economic Projections will give the market the FOMC’s own median path for the rest of 2026. Any drift lower in the dots is a signal that the institutional Fed is conceding ground to the political pressure.
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Second, the press conference. Powell will be asked about his successor. He has been disciplined about not engaging. The interesting moment is whether that discipline holds this week, or whether one carefully phrased answer becomes the headline.
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Third, the chair-pick rumor cycle. Bloomberg and the Wall Street Journal have been running stories almost daily on candidate positioning. The named-favorite tends to leak before the official decision. Watch the spread in two-year yields the morning that name appears in print.
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A Useful Frame in Closing.
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Rate decisions move portfolios for a quarter. Chair decisions move them for a decade. The S&P 500 closed Friday at 7,230.12, up 0.29% on the week, because most of the repositioning has already happened in gold, bonds, and the dollar. The equity tape is the last to move on monetary regime change — and usually the most expensive to chase.
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