Trump has narrowed his choices for the Federal Reserve Chair down to four candidates. This list includes two individuals named Kevin, along with two others whose names have not yet been disclosed. He plans to announce the new Federal Reserve Governor by the end of this week. This appointment will fill the role once held by Kugler.

Impact on Market Volatility

With the selection for the next Federal Reserve Chair down to four individuals, we expect a significant increase in market volatility. The uncertainty about future monetary policy will likely drive the VIX index, a measure of expected volatility, higher in the upcoming weeks. Traders should prepare by considering long positions in VIX futures or buying call options on volatility ETFs. The VIX has already risen to 18, up from a July 2025 average of 15. The potential candidates, including Kevin Warsh and Kevin Hassett from the 2020s, offer very different approaches to interest rates. A more hawkish choice could challenge the market’s current expectation of a 25-basis-point rate cut by the end of the year, as indicated by SOFR futures contracts. Traders are already using options to bet on significant market movements, purchasing straddles on Treasury bond ETFs like TLT, which will profit if bond prices change sharply in either direction. This uncertainty also affects equity and currency markets. A hawkish appointment could strengthen the dollar and put pressure on stock prices, making protective put options on the S&P 500 a wise choice. The options market reflects this concern, with the put-to-call ratio on major indices rising above 1.2, the highest level since the inflation scare in spring 2025.

Reactions to the Announcement

The upcoming announcement of a new Fed Governor this week will be a crucial indicator of the administration’s outlook. The nominee’s perceived leanings as either a hawk or a dove will likely lead to immediate changes in short-term interest rate futures. We observed similar short-term market reactions to personnel changes during the 2017-2018 period, often signaling longer-term policy shifts. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now