#FedLeadershipImpact

How Much Impact Did Fed Leadership Change Have on Markets?
When President Trump nominated Kevin Warsh (a known monetary hawk) as the next Fed Chair, markets reacted immediately.
📉 Market Impact (Short-Term Shock)
Crypto Market
Bitcoin fell from ~$78,000 → $68,000
Impact: -12% to -13%
Total crypto market cap dropped ~8–10% (~$400–500B wiped out)
US Equities
Nasdaq & high-growth tech stocks fell ~6–9%
S&P 500 corrected ~4–6%
AI & speculative stocks saw deeper pullbacks (10–15%)
Why this happened
Markets feared:
Faster balance sheet reduction
Less emergency liquidity
Fewer surprise rate cuts
Risk assets sold first → safety assets (USD, bonds) caught bids
📌 Key point:
This was not a crash, but a policy repricing move.
2️⃣ Fed Rate Cuts: How Much Has the Fed Cut So Far?
🔽 Fed Rate Cut Percentage (2024–2025 Cycle)
Peak Fed Funds Rate: ~5.25%
Current Rate (Early 2026): ~3.50%–3.75%
Total Cuts So Far: ~1.5%–1.75% (150–175 bps)
Expected Further Cuts (2026)
Market pricing:
0.25%–0.50% more cuts (1–2 small cuts)
Fed currently in pause mode, waiting for:
Labor market data
Inflation trend
Financial stability
📌 Important:
Cuts are slowing, not reversing — liquidity growth is gradual, not explosive.
3️⃣ What Did Rate Cuts Do to Markets?
📈 Stock Market Reaction
S&P 500 (post cuts):
+15–17% gains during 2024–2025
Historical average after non-recession cuts:
+10–30% over 1–3 years
Volatility occurred, but trend stayed up
📊 Liquidity Impact
Borrowing costs fell
Credit availability improved
Trading volumes increased
M&A, IPOs, and risk-taking rebounded
So rate cuts = bullish, but…
4️⃣ Why Isn’t the Market Straight-Up Bullish Now?
Because markets care more about future liquidity, not past cuts.
Kevin Warsh’s Policy Expectations
Less QE
Faster balance sheet discipline
Rule-based decisions (fewer emergency pivots)
This means:
Less “easy money”
Slower asset price expansion
Higher volatility, tighter ranges
📌 That’s why:
Markets corrected 5–13%
Bitcoin dropped ~12%
Liquidity temporarily tightened
5️⃣ Current Market Direction (Early 2026)
🔄 Stocks
Trend: Sideways to mildly bullish
Expect:
Pullbacks of 5–8%
Rallies capped unless earnings + liquidity improve
No recession = upside intact, but slower
🟠 Bitcoin & Crypto
BTC Current Price: $68,068
Trend: Range-bound, high volatility
Market phase:
Post-distribution
Early accumulation
Alts still weak, BTC dominance rising
💧 Liquidity Status
Liquidity is not collapsing
But also not flooding
Institutions cautious
Retail defensive
This creates: ➡️ Sharp swings
➡️ Fake breakouts
➡️ Patience-based market
6️⃣ Where Is the Market Likely Going Next?
📈 Bullish Scenario (40–45% Probability)
Fed stays paused, not hawkish
Inflation cools gradually
BTC reclaims $75K+
Stocks grind higher 5–10%
📉 Bearish Scenario (30–35% Probability)
Liquidity tightens faster
Dollar strengthens
BTC breaks $65K
Markets retest lower supports
🔁 Base Case (Most Likely – 45–50%)
Sideways market
High volatility
Gradual accumulation
No major trend until clarity from Fed
🔑 Final Summary (Simple Words)
Fed leadership change hit markets by 5–13%
Fed has already cut rates ~1.5–1.75%
Cuts are bullish long-term
Warsh creates short-term uncertainty
Markets are now:
Not crashing
Not mooning
Waiting
👉 This is a transition phase, not a top and not a bottom.