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A New Regime For The Bond Market
How are bonds faring in a world where the rules are changing? By Evan Simonoff
WHEN 2026 BEGINS IN ABOUT TWO MONTHS, the bond market is likely to have a pretty good idea who President Trump has selected to be the next chair of the Federal Reserve. Whoever the new chief turns out to be, that individual is almost certain to have more of a bias toward lower interest rates than current Chair Jerome Powell does.
Still, the selection will matter. Treasury secretary Scott Bessent has narrowed the field down to five possible candidates, though that’ s subject to change. They are Kevin Hassett, the current director of the National Economic Council and chairman of the Council of Economic Advisers in the first Trump administration; former Fed governor Kevin Warsh; current Fed vice chair for supervision Michelle Bowman; Fed governor Christopher Waller; and BlackRock fixed-income chief Rick Rieder.
David Rosenberg, the contrarian Canadian economist, predicted in an October webcast that if Trump chose Warsh, markets could expect the fed funds rate to be cut 100 basis points. If it were Hassett, Rosenberg predicted, rate cuts of up to 200 basis points would be on the table, and the economist also sees both Bowman and Waller as dovish. The final candidate, BlackRock’ s fixed-income chief Rick Rieder, was“ tough to handicap,” Rosenberg said.
Also on the webcast was DoubleLine CEO Jeffrey Gundlach, who predicted the president would pick the candidate likely to cut interest rates the most.
The challenge facing policymakers going into year’ s end is that the labor market is by all accounts softening while inflation appears to be ticking back up. As of this writing in mid-October, economic data is hard to come by with the U. S. in the middle of a government shutdown, and so it’ s difficult to identify directional signals. The markets have been waiting for what is likely to be a massive data dump once agencies reopen.
One major fear is that the economy is entering a period like the early 1970s where incipient inflation masks underlying weakness. Some economists are arguing that our current GDP growth would be practically flat were it not for the massive AI data center build-out underway— the spending on which is estimated to exceed the post-financial crisis 2009-2012 stimulus package.
NOVEMBER 2025 | FINANCIAL ADVISOR MAGAZINE | 35