Prediction markets have dramatically shifted expectations around who might lead the Federal Reserve next, with BlackRock executive Rick Rieder emerging as the market favorite to succeed Jerome Powell. According to the prediction platform Kalshi, Rieder’s chances have risen sharply - from roughly 5% to about 50% over the past two weeks - a move that has pushed him ahead of former Fed Governor Kevin Warsh and White House economic adviser Kevin Hassett, who earlier were viewed as frontrunners.
Still, researchers at Wolfe Research say they are not persuaded that the market view is complete. In a note to clients, analysts including Tobin Marcus and Chutong Zhu acknowledged that Rieder has "much to recommend him," but said they "remain unconvinced" by the market’s apparent certainty.
The Wolfe team underscored two policy dimensions where Rieder is broadly seen as compatible with President Trump’s priorities: interest rates and balance-sheet management. Rieder has publicly argued the Fed should move to rapidly lower interest rates to 3% and then determine the appropriate subsequent direction from that level. That target would represent a further downshift in borrowing costs following a sequence of rate reductions last year, though Wolfe contrasted Rieder’s stance with that of Stephen Miran - whose temporary term as a Fed Governor would expire at the end of January if no successor is confirmed - noting Miran has articulated even more aggressive cuts than Rieder has.
On balance-sheet policy, Rieder has criticized the runoff of the Fed’s mortgage-backed securities holdings, saying the runoff is "further exacerbating" a U.S. housing affordability problem. That line of criticism mirrors the argument advanced by President Trump and positions Rieder as more inclined toward a Fed posture that eases pressure on mortgage markets.
Despite these policy alignments, Wolfe Research flagged political dynamics that could complicate Rieder’s path. The analysts referenced comments President Trump made at the World Economic Forum in Davos last week, where he strongly suggested that personal loyalty would be an important factor in selecting the next Fed leader. Wolfe interpreted that emphasis as echoing the president’s past criticisms of Powell - who, although appointed earlier in Trump’s tenure, has frequently clashed with the White House over policy decisions.
Compounding the political context, Powell announced earlier this month that he was the subject of a Department of Justice criminal investigation - a probe he called politically motivated and a threat to the Fed’s longstanding independence. Wolfe said the prominence of that investigation means that loyalty could be a decisive criterion for the president, and they argued this presents a potential difficulty for Rieder, who is "in no way a loyalist."
Given these considerations, Wolfe suggested that both Kevin Warsh and Kevin Hassett remain viable candidates in the running. The analysts wrote that markets may have "misinterpreted" a recent remark by Trump in which he said he wants Hassett to continue as National Economic Council director; Wolfe characterized that statement as a "cheeky quip" expressing how much Trump values Hassett, rather than a definitive signal that Hassett would not be considered for the Fed job.
Wolfe also assessed likely Senate behavior toward any nomination. They argued Senate Republicans, despite lingering reservations about Powell’s treatment, would probably "have no problems" confirming any of Trump’s picks once the probe into Powell is resolved. Wolfe called the notion that Hassett would be uniquely unconfirmable "absurd," pointing to his extensive relationships across the Republican coalition. They added that while credibility with the rate-setting Federal Open Market Committee and confidence from markets could be a reason to avoid Hassett, Senate confirmability itself should not be viewed as an obstacle.
The analysts’ view leaves the nomination process clouded by competing signals: prediction markets are elevating Rieder on the strength of his publicly stated policy preferences, but political factors highlighted by Wolfe - loyalty concerns, the ongoing investigation involving Powell, and differing views on the pace of rate cuts - suggest that the shortlist is likely to remain competitive.
Summary
Rick Rieder has become the prediction markets’ leading candidate to succeed Jerome Powell, with his odds rising from about 5% to roughly 50% on Kalshi. Wolfe Research’s Tobin Marcus and Chutong Zhu say Rieder’s views on rate reductions to 3% and a softer mortgage-backed securities runoff align with President Trump, but they remain skeptical the market has fully priced in political considerations, including Trump’s emphasis on loyalty and the criminal probe involving Powell. Those dynamics, Wolfe argues, keep Kevin Warsh and Kevin Hassett in contention and suggest Senate confirmability is unlikely to be the deciding barrier for nominees.
Key points
- Prediction markets have rapidly boosted Rick Rieder to roughly 50% odds of becoming Fed Chair, up from about 5% two weeks earlier - a shift that positions him ahead of Kevin Warsh and Kevin Hassett.
- Rieder favors quickly lowering interest rates to 3% then reassessing policy and has criticized the Fed’s runoff of mortgage-backed securities as worsening housing affordability - stances consistent with President Trump’s preferences.
- Political considerations - notably Trump’s public emphasis on loyalty and the Justice Department probe involving Jerome Powell - could limit Rieder’s appeal and keep other candidates, including Warsh and Hassett, in the mix; Senate Republicans would likely confirm a nominee once the probe is resolved.
Risks and uncertainties
- Loyalty as a selection criterion - If loyalty to the president becomes a central requirement, Rieder may be disadvantaged because he is not viewed as a loyalist. This risk affects the nomination outcome and therefore market expectations for policy direction.
- Ongoing criminal probe - The Department of Justice investigation involving Jerome Powell, which Powell has described as politically motivated, creates uncertainty; Wolfe says confirmation prospects for nominees could improve once the probe is resolved.
- Market misinterpretation of presidential remarks - Wolfe argues markets have "misinterpreted" Trump’s remark about Hassett, suggesting market pricing may be reacting to comments that were intended as a lighthearted compliment rather than a clear signal about succession plans. Misreading such signals could distort expectations for interest rates and housing policy.
Note: This article reports the assessments and quotations attributed to Wolfe Research and references prediction odds reported by Kalshi. It does not introduce new facts beyond those presented by those sources.