Who will replace Jerome Powell in May 2026? This is one of the big questions stirring the markets. More specifically, it is stirring a handful of journalists and a few macro research teams around the world. As fate would have it, we are amongst them.
While Donald Trump never misses an opportunity to criticize Jerome Powell and call for his resignation whenever he is given a microphone, his dismissal seems unlikely and the focus is now on the appointment of his successor. As a reminder, Jerome Powell's term expires in May 2026.
According to the Wall Street Journal, two names most often mentioned as his successor are Kevin Warsh and Kevin Hassett, respectively former Fed governor (2006-2011) and current director of the National Economic Council. On Monday, the Washington Post also cited Kevin Hassett as one of the favorites for the job.
But behind the two Kevins, another name keeps coming up: Scott Bessent, currently Treasury Secretary. Although he has been repeating for several weeks that he has "the best job in Washington," he has not declined the offer and always points out that it will be "President Trump's decision."
Confidence of both the markets and the president
Since the beginning of the second term, Scott Bessent has been perceived by the markets as "the adult in the room." The former hedge fund manager understands the markets and knows how to get messages across to investors. He is the one in the administration who brings everyone back to less disruptive positions.
Surrounded by much more ideological figures such as trade advisor Peter Navarro and Commerce Secretary Howard Lutnick, Bessent is more pragmatic. And that's what the markets like. In April, we shared a study by Renaissance Macro that concluded that trading sessions were on average negative when Lutnick or Navarro spoke, and on average positive when Bessent spoke. Since then, Howard Lutnick has been a little less present in the media, while Peter Navarro seems to have disappeared from the scene.
Scott Bessent's experience in finance also serves him well in his relationship with Donald Trump. According to Bloomberg, during a meeting with billionaires last week, he reportedly confided that the president shares a character trait with his former boss George Soros: impatience when it comes to closing deals.
What is certain is that Scott Bessent has the president's trust and that the latter recognizes his ability to reassure the markets. "He goes on television and calms the market. I go on television and stir up the market. And I say, 'We'd better send him over there,' Howard (Lutnick), right? And the market became so calm and at ease again. So you're doing a good job, Scott," he said Monday at the White House.
His ability to speak to the markets makes him a credible candidate to succeed Jerome Powell. According to the latest monthly survey of Bank of America fund managers, Scott Bessent is even the investors' favorite, well ahead of Warsh and Hassett.
Backlash
Donald Trump seems to have given up on the idea of firing Jerome Powell, but he and his administration are nevertheless maintaining constant pressure, probably in the hope that he will quit of his own choice. This is evidenced by the alleged scandal surrounding the Fed's renovation and the way it has been exploited.
While Jerome Powell's term expires in May 2026, he will still be Fed governor until January 2028—the term of office for the chair (four years, renewable) is separate from that of the governor (14 years, non-renewable). And the Trump administration seems to be doing everything it can to ensure that he chooses to leave next May.
When asked yesterday on Bloomberg, Scott Bessent said: "Traditionally, the Fed chair also leaves his position as governor, and we often hear that a shadow Fed chair could cause confusion before his appointment," Bessent added. "And I can tell you that keeping a former Fed chair would cause a lot of confusion for the market."
There are two things to say about this statement. First, what's great is that Scott Bessent himself created the confusion he's talking about. It was he who, last October, launched the concept of a "shadow Fed chair," i.e., the idea of appointing Jerome Powell's replacement in advance. The shadow chair would then make speeches to guide market expectations, just like a sitting Fed chair. "No one will listen to Jerome Powell anymore," Bessent concluded in an interview with Barron's in October.
Second, the idea of a shadow chair could backfire on the next Fed chair. If he or she is perceived as being too aligned with President Trump, he or she could suffer from a credibility deficit within the FOMC (the Fed's monetary policy committee).
There is a risk of becoming a "chairman in name only," to borrow the phrase coined by Neil Dutta of Renaissance Macro, i.e., someone whose authority and views will be challenged within the FOMC. Because if all the other committee members have a different view from his – let's say, for example, that they are less inclined to cut rates – the chairman alone cannot decide to do so.
Ultimately, the next Fed chair could in turn fall victim to a "shadow Fed chair," a certain Jerome Powell. He could use his influence to continue to guide the debate and market expectations behind the scenes and in his public statements.
It is therefore understandable why Scott Bessent is pushing for Jerome Powell to resign at the end of his term as chairman. For now, Powell is leaving the question open. He has been asked about it numerous times in recent months, but has yet to clarify his intentions.
