Market Sentiment and Kevin Hassett's Rising Odds
Prediction markets are increasingly indicating Kevin Hassett as the favored candidate to lead the Federal Reserve, a sentiment traders are directly linking to expectations of lower inflation. This observation was shared online by Jason Miller, a former senior advisor on Donald Trump’s transition team. Miller highlighted that while Trump has not officially announced a decision, Kevin Hassett's potential selection aligns with current market behavior.
Accompanying his post, Jason shared a chart from Kalshi, a prediction market platform. This chart illustrated Kevin Hassett's ascending odds of being appointed Fed Chair, juxtaposed with softening future inflation pricing, influenced by the platform's participants.
Kevin Hassett, currently the director of the National Economic Council, has rapidly emerged as a leading contender in recent weeks. On the prediction market Polymarket, his odds surged from approximately 30% at the end of November to 73% by Friday, placing him significantly ahead of other rumored candidates.
Earlier in the week, Trump commented on potential Fed Chair candidates during a White House event. He remarked, "I guess a potential Fed Chair is here too, I don’t know, are we allowed to say that? Potential. He’s a respected person, that I can tell you. Thank you, Kevin."
Treasury Markets React to Hassett's Leading Position
The Treasury markets have responded to the increasing likelihood of Kevin Hassett's appointment. Following a Bloomberg report last Tuesday identifying him as the top contender, the 10-year Treasury yield climbed by 14 basis points as of press time. This movement suggests investors are adjusting to the prospect of a Fed chair who has previously advocated for significant interest rate cuts.
The rise in yields occurred despite Hassett's known stance on advocating for lower borrowing costs. This paradox indicates that the trading floor perceives a potential return of inflation if rate cuts are implemented too aggressively.
Michael Brown, senior research strategist at Pepperstone, commented on this phenomenon, stating, "That’s basically because we know that Kevin Hassett is very, very loyal to President Trump. It is almost solely on the back of Hassett, given that we’ve had nothing really else to trade on this week."
This sentiment was also reflected in the currency market. The U.S. Dollar Index experienced a decline, moving from 99 to 98 after the Bloomberg report, which is contrary to the typical strengthening of the dollar by higher Treasury yields.
The combination of a weaker dollar and higher yields has become a significant factor in the market's assessment of what Kevin Hassett's leadership at the Fed could entail. This outlook was echoed by Ryan Swift, chief bond strategist at BCA Research. He advised, "We continue to recommend Treasury curve steepeners as a high conviction trade heading into 2026," anticipating that long-term yields would continue to rise based on current expectations.
Some investors interpret Hassett's ascendancy as an early indicator that inflation might persist above the Fed's target for an extended period. Art Hogan, chief market strategist at B. Riley Wealth Management, observed, "I think that investors are looking at the whole picture and saying, ‘well, inflation is certainly going to be reported above the Fed’s target for quite some time.’"
Furthermore, the structural limitations on a Fed chair's influence cannot be overlooked. The chair holds only one vote among the twelve members of the Federal Open Market Committee. Consequently, Kevin Hassett would still require consensus from officials who hold more hawkish views.
Convincing these members to support rapid or substantial rate cuts may not be guaranteed, even with the backing of President Trump.