Global! The core logic behind the violent fluctuations

! Panic buying with huge profits reversed!

Trump has always wanted to ease monetary policy, but he nominated Kevin Warsh, who has a "hawkish gene," as the next Federal Reserve chairman (replacing Powell, who will step down in May). Although Warsh recently turned "dovish" to cater to Trump, the market did not buy it. Instead, panic over his "inherent hawkish gene" triggered a sharp repricing of asset prices.

Trump wants a significant interest rate cut, but Warsh's historical record makes the market worry that he will adopt a "hawkish approach that Trump does not want" to manage the economy.

• Historical baggage: During his tenure as a Federal Reserve governor from 2006 to 2011, Warsh was a well-known "inflation hawk." During the financial crisis, while others were bailing out the market, he insisted on focusing on inflation risks and advocated ending quantitative easing as soon as possible. The market generally believes he inherently opposes excessive easing.
• Unique policy combination: "Rate cuts + balance sheet reduction": What the market fears most is not the rate cuts but Warsh's proposed "synchronized balance sheet reduction." This means that although interest rates are lower, the Federal Reserve will simultaneously withdraw liquidity from the market (reducing the balance sheet). This combination of "tightening liquidity while lowering interest rates" is a huge negative for assets that rely on capital accumulation (such as tech stocks, cryptocurrencies, and precious metals).

As soon as Warsh's nomination was announced, the market reacted extremely violently, showing typical "risk-off + repricing" characteristics:

• 📉 Stocks and precious metals plummeted:
  • Gold and silver: Gold prices were at historical highs earlier, with many profit-taking positions. Warsh's hawkish nomination was seen as a strong dollar signal, causing gold prices to plunge (at one point falling more than 10%), with silver falling even more.
  • U.S. stock futures: The market is worried about liquidity tightening, with S&P 500 and Nasdaq futures both showing significant declines after the news.
• 💹 The U.S. dollar and Treasury yields soared:
  • U.S. dollar: The market believes Warsh will more firmly defend the Federal Reserve's independence than Powell and support a "strong dollar" policy, directly boosting the dollar index and recovering previous losses.
  • Treasury yields: To hedge against future inflation and policy uncertainty, investors began selling bonds, pushing Treasury yields higher and steepening the yield curve.

Is this another piece of market-manipulating performance art by Trump?