In our last post, we considered the impacts of escalating tensions between US President Donald Trump and his Federal Reserve Chair Jerome Powell. If Trump fired Powell, how might that affect markets?
In this post, we consider the candidates widely considered to be in the running to replace Powell in what is arguably the most influential and responsible role in global finance.
Prediction markets offer a view of who could take the top central bank job. The odds placed on each candidate suggest that only Scott Bessent and Chris Waller are believed to have the experience and gravitas needed to reassure markets.
Snapshot of the candidates
Kevin Warsh: A financier and a former Fed governor (2006 to 2011), Warsh helped guide the bank through the 2008 financial crisis, liaising closely with Wall Street. He is generally viewed as Trump-friendly and pro-growth.
Kevin Hassett: Currently director of the National Economic Council, Hassett has advised US presidents, including Trump, on economic issues. He has a close relationship and strong ideological alignment with Trump, and has echoed his criticism of the current Fed.
Scott Bessent: The current Treasury Secretary and a former hedge fund manager, Bessent is viewed as relatively moderate, with deep markets familiarity. He could bridge Trump’s more aggressive trade policies with financial stability.
Chris Waller: A sitting Fed governor, Waller has lately taken a dovish stance and could be a pacesetter for earlier rate cuts.
Runners-up: Former Trump economic advisor Judy Shelton and former World Bank president David Malpass are considered long shots.
What prediction markets say
Prediction markets suggest a competitive and fluid race, with Bessent and Warsh leading, followed closely by Hassett and Waller — and a significant chance that Powell stays through May 2026, when his term as chair expires.
Bessent is currently seen as the front‑runner, with odds around 23%, buoyed by his market-friendly reputation and a smooth potential transition from Treasury. Warsh follows with approximately 20 to 24% odds, based on his institutional expertise and earlier vetting by Trump. Hassett holds about 16 to 18%, reflecting his ideological loyalty but potential confirmation hurdles. Waller’s odds range from 12 to 21%, with a recent surge: markets view him as a balanced, Fed-experienced candidate with bipartisan appeal.
A 32% probability remains that Powell completes his term, as some markets still favour continuity rather than early replacement
Warsh or Hassett risk fuelling inflation and FX weakness if rate cuts outpace economic fundamentals. These risks, or perceived threats to Fed independence, could provoke sharp moves across all asset classes, especially FX and credit markets.
In contrast, Bessent or Waller would likely calm investors, containing volatility while providing moderate easing. Bessent is market-friendly and a perceived technocratic, so he’s the most stable outcome for credit and rates. Waller, while more dovish than Powell, is seen as a continuity candidate, implying only modest volatility.
The outcome of a Fed leadership shake-up would reshape global markets, and could tip the balance toward stability or turmoil. If Trump replaces Powell, the distinction between ideology and credibility matters more than ever. Markets are likely to favour candidates who signal technocratic discipline and continuity with existing policy norms. Bessent and Waller offer that reassurance, while Warsh and Hassett bring higher uncertainty.
In our next blog and the final in this series, we build upon the stress scenarios introduced in our previous two posts, demonstrating how RiskSmart’s robust stress testing engine applies these shocks to a model portfolio, revealing their impact across different asset classes
Trouble at the Fed: Modeling the impact of firing Chairman Powell
