Billionaire Dalio sends 2-word message on Fed pick Warsh

Federal Reserve is about to elect a new Federal Reserve Chairman. After a year of criticism, President Trump nominates long-time nominee Wall Street Insider and former Fed Reserve ChairmanKevin Warsh taking over the role from those with very bad intentions Jerome Powell,

Picking Warsh raised eyebrows on Wall Street, including my own. hawk rate depreciation contributes to choppy trading and the meltdown of silver and gold. Still a billionaire hedge fund myth Ray Dalio He made a clear two-word comment about the decision, calling it a “great choice.” X, old twitter.

Dalio’s support follows similar comments from another legendary hedge fund manager: Stanley Druckenmiller. Druckenmiller said: Finance Times He said Warsh was “very open-minded” and “excited about the partnership with him.” [Scott] Very good.”

Dalio and Druckenmiller’s vote of confidence is significant. The pair have 100 years of collective experience navigating good and bad economics on Wall Street and have each managed billions of dollars, starting with Fed Chairman Paul Volcker. inflationThey range from Alan Greenspan to Powell, who navigated the internet boom and bust in the 1980s.

Market jitters largely stem from fears Warsh will target inflation further unemploymentHe kept rates neutral rather than cutting them more dramatically as many had hoped.

The Fed’s decisions are based on the following: dual authorization:

• Low inflation.

• Low unemployment.

This is often a difficult trade-off: Higher rates reduce inflation but increase unemployment, and vice versa.

In 2025, the contradiction was clear. After cutting interest rates at the end of 2024, Powell stayed on the sidelines until September, keeping rates steady amid fears that further cuts would trigger inflation as inflation tariffs kick in.

Related: Warsh’s nomination fuels Fed independence fears on Wall Street

The decision raised the ire of President Trump and ultimately cost Powell his job.

Warsh’s candidacy was somewhat surprising to markets, which had expected someone with a much more dovish stance on rates to win the President’s approval. During his tenure as Fed Governor from 2006 to 2011, Warsh criticized the Fed for relying heavily on rate cuts to support the economy even as job losses mounted.

He also criticized the Fed for mission drift and Fed warns about monetary easing Policies that reduce lending rates by purchasing bonds. His past positions have raised concerns that he could raise the Fed Funds Rate and ease the Fed’s pressure balancegreater printing rates.

But Dalio doesn’t seem worried about Warsh’s ability to walk the economic tightrope.

“Those of us who have long been in touch with policymakers and markets know him and respect his abilities and decisions,” Dalio wrote of X. “He is a knowledgeable and reasonable man who understands the risks of having a Fed policy that is both too easy and too tight.”

Drucken miller He was even more frank:

Dalio, the founder of Bridgewater Associates, one of the largest and most successful hedge funds of all time and manager of nearly $100 billion in assets, has been banging the drum on the risks to the economy from rising U.S. debt.

America’s debt collected $38.4 trillion We are heading towards 2026 with no signs of slowing down. The debt burden and continued appetite for spending increases the need for foreign banks to want to buy Treasury securities; That could become a big problem and support Treasury yields if they hesitate due to geopolitical tensions, trade wars or concerns that ultimately defaulting isn’t as crazy as it seems.

Debt risk is not the only problem facing the economy. Layoffs reached 1.2 million in 2025, the seventh-worst year since 1989. Challenger, Gray and Christmascontribute unemployment is increasing with from 4% to 4.4% a year ago. Meanwhile, we’re dealing with stick inflation. Consumer Price Index climbed from 2.3% to 2.7% This was before most tariffs went into effect last April.

The crosscurrents present a difficult balancing act for Warsh, who must weigh the potential risks. recession due to continued job losses and the potential for inflation to remain above the Fed’s 2% target.

Concerns that Warsh will keep rates higher for longer are not supported by the futures market. CME FedWatch The tool uses futures trading to calculate the likelihood of changes in interest rates, and there have been no significant changes since the Warsh news broke.

In fact, the odds of rates falling from 3.5% to 3.75% in July fell to 3.25%, rising from 21.7% to 25.1% last week.

More Federal Reserve:

It’s his long experience on Wall Street that likely contributed to the market’s optimism that Warsh will keep pace with the economic accelerator by lowering interest rates.

Warsh, an economic expert and lawyer who attended the meeting at Stanford, Harvard, And MYTHHe spent the 90s rising through the ranks Morgan StanleyHe was appointed as Executive Director of Mergers and Acquisitions. Prior to joining the Fed as Governor, he served as Executive Secretary of the National Economic Council under President George W. Bush.

“I expect my previous experience on Wall Street, particularly my nearly 7 years at Morgan Stanley, will be useful for the Federal Reserve’s negotiations and communications,” he said. Warsh At his confirmation hearing in 2006.

Since leaving the Fed in 2011, he has been a partner at Druckenmiller’s Duquesne Family Office, where he worked closely with the hedge fund manager and co-authored his columns. The connection to Bessent is also strong, given that Bessent was a Druckenmiller protégé and worked under him at Soros Capital Management.

Druckenmiller’s support is understandable, and given all the ties, it’s reasonable to conclude that Warsh will work with Bessent, who was a strong advocate for low interest rates when he was President Trump’s Treasury Secretary.

“He probably also knows how to deal with the president and the Treasury,” Dalio said.

My takeaway: Warsh has struck a more dovish tone throughout his time lobbying for the Fed Chair, and while he has hawkish tendencies, it seems unlikely he would accept the job with the intention of putting a hawkish target like Powell on his back.

Overall, his nomination could reflect exactly the balance markets need — someone rooted in Fed independence, with a track record of being willing to keep interest rates high or low as the economy dictates — which is reassuring given last year’s concerns that whoever gets nominated would eventually destroy Fed independence as we know it.

Related: Why are silver bears bullish after record drop?

This story was first published by . Street First appeared on February 1, 2026 Fed section. Add TheStreet at: Preferred Source by clicking here.