Warshonomics Unpacked

The expected appointment of Kevin Warsh as Fed Chair in May 2026 signals a pivot toward a leaner balance sheet and a focus on AI-driven productivity. This 'regime change' likely favors a steepening yield curve but risks market instability if balance sheet shrinkage is poorly managed.

Key Takeaways

• 1.Kevin Warsh is expected to succeed Jerome Powell as Fed Chair after May 15, likely pursuing a leaner Fed balance sheet and reduced market intervention.
• 2.A sudden reduction in the Fed's $6.6 trillion balance sheet faces significant structural risks in repo markets given current low reserve levels.
• 3.The 'Warsh Fed' might initially shift its asset composition toward Treasury bills rather than aggressive balance sheet shrinkage to avoid 'mission creep'.

Table of Contents

• Berenberg Macro View
• An easier and less painful alternative to leaner balance sheet
• Reminiscent of 1960s?
• We all were hawks at some point
• AI and productivity
• What is the trade here?
• Disclaimer
• Remarks regarding foreign investors
• United Kingdom
• United States of America
• Copyright

Document Preview

Page 1 of 4

Subscribe for full accessStart Free Trial