Fed Chair Race Shift: Warsh Emerges as Favorite Following Trump's Comments (Dec 16, 2025)

The event centers on the December 16, 2025 CNBC “The Exchange” segment featuring Dan Clifton (head of policy research at Strategas), who emphasized former President Donald Trump’s comments had “opened a window” for former Fed Governor Kevin Warsh in the Fed Chair race [1]. The catalyst was Trump’s December 12 Wall Street Journal interview, where he elevated Warsh to the “top tier” of candidates alongside White House economic adviser Kevin Hassett [3][4]. This disrupted a previously clear dynamic, where Hassett was the overwhelming prediction market favorite (77% odds on Kalshi) [2].

By December 16, Warsh’s Kalshi odds surged 360% to ~46%, making him the narrow favorite, while Hassett’s odds dropped to ~39% [2]. The S&P 500 ETF (SPY) declined 0.93% on December 12 (the day of Trump’s interview) and continued a downward trend through December 16, reflecting investor uncertainty about the next Fed Chair’s policy stance [0]. Warsh, a former Fed governor (2006–2011), is viewed as a credible Republican pick, while Hassett’s close ties to Trump’s economic team have raised concerns about Fed institutional independence [2].

1. Political Comments Drive Market Volatility
   : Trump’s casual mention of Warsh in the WSJ interview triggered significant shifts in both prediction markets (Kalshi) and equity markets (SPY), illustrating how political signals can rapidly impact investor sentiment [0][2].
2. Fed Independence as a Market Factor
   : The narrowing race highlights investor scrutiny of Fed independence—Warsh’s appeal stems from his perceived distance from the current administration, while Hassett’s ties raise concerns about potential White House influence over monetary policy [2].
3. Prediction Market Responsiveness
   : The 360% surge in Warsh’s Kalshi odds within a week is a rare swing in high-stakes government appointment betting, underscoring the market’s sensitivity to breaking political news [2].

• Risks
  :
  • Continued market volatility as the Fed Chair race remains fluid, with uncertainty over the next chair’s policy approach (e.g., hawkish vs. accommodative) [0][2].
  • Elevated concerns over Fed independence if Hassett is nominated, potentially eroding market confidence in the central bank’s ability to make data-driven decisions [2].
• Opportunities
  :
  • Investors anticipating a more market-aligned Fed could position for potential stability under Warsh, given his background as a former Fed governor [2].
  • The race’s transparency (via prediction markets) provides real-time insights into market expectations for Fed leadership [2].

The December 16, 2025 CNBC segment brought attention to the shifting Fed Chair race, where Kevin Warsh emerged as the favorite following Trump’s December 12 WSJ comments. Warsh’s Kalshi odds rose to ~46% from ~10%, while Hassett’s dropped to ~39%. The SPY declined 0.93% on December 12 and trended downward through December 16. Warsh is viewed as a credible, independent candidate, while Hassett’s ties to Trump raise Fed independence concerns. The event underscores the impact of political comments on markets and the significance of Fed leadership for investor sentiment.