Kevin Warsh's Fed Nomination Threatens to Raise Borrowing Costs for a Pricey Stock Market

Borrowing costs will likely increase for a stock market currently powered by the artificial intelligence revolution and priced at historically expensive levels. This shift is driven by the Federal Reserve's nomination of Kevin Warsh to succeed Jerome Powell as Fed chair on May 15. Warsh's voting record during the financial crisis indicates a preference for price stability over unemployment, suggesting he is unlikely to advocate for aggressive interest rate cuts. Warsh has also advocated for a radical reduction of the Federal Reserve's balance sheet, which currently holds approximately $6.66 trillion in total assets as of April 8, 2026. To achieve this reduction, the the Fed would sell off long-term Treasury bonds and mortgage-backed securities. This action reduces Treasury bond prices, which boosts bond yields and increases borrowing costs. Higher borrowing costs lower the value of an expensive stock market.