Buffett says Trump's pick of Kevin Warsh for Fed chair was 'good choice'

Warren Buffett told CNBC that new Fed Chairman Kevin Warsh is a “good choice,” pointing to Warsh’s early stance of holding rates steady and outlining a policy “regime change.” In Congressional testimony, Warsh pledged to tackle inflation and target the Fed’s dual mandate of 2% inflation and maximum employment. While no new rate decision or data was cited, Buffett’s endorsement and Warsh’s inflation focus could modestly influence expectations for the Fed’s near-term direction.

Analysis

The market implication is less about Buffett and more about the signaling value of a politically aligned Fed that is still willing to tolerate slower growth to re-anchor inflation expectations. In the next few days, that is mildly bearish for duration-sensitive assets: long bonds, REITs, homebuilders, and high-multiple growth names should trade as if the policy path stays restrictive longer than the market had discounted. The first-order move is likely small, but the second-order effect is a higher equity risk premium for leveraged balance sheets and weaker refinancing windows.

Banks are a mixed bag. Higher-for-longer rates can support net interest income, but if the market takes the testimony as a real regime shift rather than rhetoric, credit spreads can widen faster than loan yields reprice, which is usually worse for regional lenders with CRE or consumer exposure. That makes names like OZK more vulnerable than the large-cap money centers, while low-duration cash-flow businesses and insurers benefit from a flatter discount-rate shock.

The contrarian read is that this is still mostly narrative until the Fed proves it with balance-sheet policy, guidance, and inflation outcomes over 1-3 months. If CPI/market-based inflation expectations keep softening, the same "hawkish credibility" story can actually become bullish for risk assets because it reduces the probability of a forced tightening cycle later. So the trade is tactical, not structural, unless the next two inflation prints and the testimony both confirm a willingness to keep real rates positive into slowing growth.

Key Decisions for Investors

• Short IWM vs long XLF for the next 2-6 weeks: small caps are most exposed to higher real rates and tighter refinancing, while financials have less duration risk; stop if 10Y yields fail to break higher after the Senate testimony.
• Buy TLT puts or run a short-duration Treasury hedge into the testimony window: this is a clean way to express a hawkish policy reprice with limited single-stock idiosyncratic risk; reassess if breakevens fall more than nominal yields.
• Fade REITs/homebuilders via IYR or XHB on any post-testimony rally: these sectors are sensitive to discount-rate persistence and mortgage-rate expectations, with the best risk/reward over 1-3 months if yields stay sticky.