The secret battle for the Fed Chair heats up: funds have been committed, what is the market predicting?

The intuition of the capital markets is always the most敏感.

In predicting the market Polymarket’s Fed Chair nomination pool, a stunning reversal has occurred over the past two weeks—once overwhelmingly leading Hasset, whose probability of winning has plummeted from over 80% in early December, while former Fed Governor Waller has surged, once reaching a 45% chance and even overtaking his opponent. Although the latest data shows Hasset back in the lead (53% to 27%), this seemingly settled “succession battle” has taken an unpredictable turn after a White House meeting between Trump and Waller.

This is not merely personnel rivalry but a market re-pricing of the dollar liquidity logic for the next four years—choosing the wrong person could mean a completely different monetary policy path.

Why Did Market Funds Suddenly Shift?

If you think this competition is just a power struggle within the White House, you underestimate the influence of Wall Street elites.

According to media reports, JPMorgan Chase CEO Jamie Dimon recently expressed support for Waller at a private summit of asset management giants, explicitly stating that Hasset might push overly aggressive rate cuts to please Trump, thereby triggering inflationary backlash. This statement reflects the collective voice of Wall Street bankers—they are not worried about rate cuts per se but about uncontrolled liquidity floods.

Further details are even more intriguing. In a public statement, Hasset tried to demonstrate his “independence” to the bond market. When asked about the influence of Trump’s opinions on Fed decisions, he emphasized “it will carry no weight,” adding, “if inflation rises from 2.5% to 4%, then we can’t cut rates.”

This textbook-style Fed chair speech, originally meant to soothe bond traders, could very well have earned him disapproval from Trump. The reason is simple—Trump now needs a “compliant” partner, not another “preacher” like Powell. It was after these remarks were made public that Trump and Waller’s meeting began to be reported by the media, and afterward, Trump changed his tone, saying “both Kevins are great.”

Waller: The Forgotten “Old Guard” and Rekindled Hope

Waller is not a sudden outsider. During Trump’s first term, he nearly got everything.

In 2017, at just 35 years old, Waller, as the youngest Fed Governor in history, competed with Powell in the final selection process. As a trusted aide to Bernanke during the 2008 financial crisis, Waller was expected to become the new Chair but lost to Powell, who was heavily lobbied by then-Treasury Secretary Mnuchin.

Now, four years later, Trump seems to be correcting that “mistake.” At the end of last year, The Wall Street Journal reported, citing insiders, that Trump considered appointing Waller as Treasury Secretary. It can be said that Waller has never truly left Trump’s radar.

Waller’s “hardcore network” is his first trump card—his father-in-law is Estée Lauder heir and billionaire Ronald Lauder, who is not only a long-term Trump supporter but also a college classmate and close friend of Trump. Additionally, Waller is a longtime friend of Treasury Secretary Yellen. This layered network naturally makes him seen by Trump as “one of us.”

From a professional background, Waller almost embodies all the labels of Wall Street elites: Stanford economics undergraduate, Harvard law PhD, veteran of Morgan Stanley’s M&A department, key figure in the Bush Jr. administration’s economic policy, and Fed Governor. This versatile profile allows him to understand Wall Street’s rules and seamlessly connect with Trump’s core circle.

Two Completely Different Monetary Policy Visions

If Hasset represents “dovish easing,” Waller embodies “precise reform.”

As the most outspoken “anti-QE” advocate in the past fifteen years, Waller has repeatedly criticized the Fed’s abuse of its balance sheet. In 2010, he resigned in protest against the second round of quantitative easing (QE2). His core logic is very clear—“if we quiet down the printing presses, our interest rates can actually be lower.”

This means Waller aims to suppress inflation expectations through active balance sheet reduction (QT), creating room to lower nominal interest rates. It’s not just about rate cuts but a high-difficulty operation of “trading space for time,” trying to end the past fifteen years of “money-driven” era.

According to Deutsche Bank’s analysis, if Waller takes over, the Fed might deploy a unique combination: on one hand, cooperating with Trump on rate cuts, and on the other, aggressively shrinking the balance sheet. Unlike Powell’s approach of fine-tuning the economy, Waller advocates that the Fed should “do less.” He criticizes the Fed’s “mission creep” into climate and inclusivity issues, insisting that the Fed and Treasury should each do their own jobs.

But Waller is fundamentally a “reformer,” not a “revolutionary.” His vision for the Fed’s future is “restoration”—retaining its core structure but removing the mistakes of the past decade. If he leads, the Fed will return to its primary mission—defending currency value and price stability, rather than letting monetary policy take on fiscal responsibilities.

Long-term Perspective and Real Considerations

For crypto assets and tech stocks accustomed to liquidity “feeding,” Waller’s rise is indeed a challenge in the short term. In his view, unlimited liquidity is not only toxic but also something that needs to be systematically eliminated.

But looking further ahead, Waller might actually be a true “ally”—thanks to his admiration for free markets and deregulation, and his optimistic outlook on the US economy. He believes AI and deregulation will trigger a productivity boom similar to the 1980s. Moreover, he is one of the few senior officials who has invested directly in crypto projects, having invested in stablecoin project Basis and crypto index fund manager Bitwise.

This undoubtedly lays a foundation for healthy growth of financial assets after the “de-bubbling” process in the long run.

Of course, Waller and Trump are not entirely aligned. The biggest risk lies in trade policy—Waller is a staunch supporter of free trade and has publicly criticized Trump’s tariffs as potentially leading to “economic isolationism.” How he navigates the delicate balance between “maintaining dollar credibility” and “meeting Trump’s tariff/rate cut demands” will be his greatest test.

The Final Power Logic

The essence of this “dual Kevin” contest is a choice between two market paths.

Choosing Hasset is a party of liquidity frenzy, with the Fed following the White House’s lead, likely turning into a cheerleader for stocks. In the short term, NASDAQ and BTC could skyrocket, but at the cost of runaway inflation and further collapse of dollar credibility.

Choosing Waller, on the other hand, probably means a surgical reform—markets may experience pain from liquidity tightening in the short term, but with “deregulation” and “sound money” backing, long-term capital and Wall Street bankers will feel more secure.

But regardless of who ultimately wins, one fact will not change: in 2020, Trump could only criticize Powell on Twitter; by 2025, with a landslide victory, Trump will no longer be content to be just an observer.

Whether Hasset or Waller takes center stage may determine the story of the markets over the next four years, but the ultimate director of this drama is already firmly in Trump’s hands.