MONETARY

• President Donald Trump officially nominated Kevin Warsh to be the next Chair of the Federal Reserve on January 30, 2026. If confirmed, he will succeed Jerome Powell, whose term as Chair ends in May 2026¹
  • Warsh served on the Board of Governors from 2006 to 2011. Appointed at age 35, he was the youngest governor in the history of the Federal Reserve¹
  • Most recently, he has been a fellow at the Hoover Institution and a lecturer at Stanford. Professionally, he was a partner at a family investment office and previously worked at Morgan Stanley¹
  • Warsh is a lawyer by training (Harvard Law) rather than a Ph.D. economist, leading individuals to believe his tenure at the Fed will be regulation-focused¹
  • Regarding Warsh’s monetary policy stance:
    • Historically, he was known as a “hawk,” favoring higher interest rates to curb inflation. However, he has recently aligned more closely with the White House’s calls for lower rates, leading some analysts to wonder if his current stance is a policy pivot or a strategic alignment with the administration¹
  • With regards to confirmation proceedings:
    • Warsh is generally considered a “safe” and experienced choice by the business community, his confirmation may not be immediate:
      • Senate Hurdles: Senator Thom Tillis (R-NC) has signaled he may block the confirmation until a Department of Justice investigation into Chair Powell is resolved¹
      • Independence Concerns: Critics, including Senator Elizabeth Warren, have raised concerns about whether Warsh will prioritize political loyalty over the Fed’s traditional independence¹
      • Warsh needs a simple majority vote in the Senate to be confirmed, however a formal Senate vote may be blocked by Senator Thom Tillis (R-NC) in the pre-floor committee vote¹
• Pursuant to the January FOMC meeting, the Federal Reserve opted to leave rates unchanged at the current level of 350-375^. Chairman Powell also noted various takeaways regarding the health of the US Economy²
  • Powell noted that overall activity remained solid and growth continues to trend positive, but not without some areas of concern²
    • (Powell) “Available indicators suggest that economic activity has been expanding at a solid pace. Consumer spending has been resilient, and business fixed investment has continued to expand. In contrast, activity in the housing sector has remained weak. The temporary shutdown of the federal government likely weighed on economic activity last quarter, but these effects should be reversed as the reopening boosts growth this quarter.”²
  • Regarding whether the Fed views current monetary policy as neutral, Powell offered a diversified perspective²
    • (Powell) “What we say is it’s within the range of plausible estimates. This is the higher end of that range, but it’s—so for some people, I think, it’s neutral. I think, and many of my colleagues think, it’s hard to look at the incoming data and say that policy’s significantly restrictive at this time. It may be—it may be sort of loosely neutral, or it may be somewhat restrictive, it’s in the eye of the beholder, and of course, no one knows with any precision”²
  • When asked if the effects of tariffs have already moved through the economy in their entirety
    • (Powell) “A lot of it has. So, basically there are many different estimates, and they’re all highly uncertain. But most of the over run in goods prices is from tariffs. And that’s actually good news, because if it weren’t from tariffs, it might mean it’s from demand and that’s a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. So, most of the overshoot, if you were to take that out, you’d get—you would—I mean inflation, core PCE inflation is running just a bit above 2 percent, x the effects of tariffs on goods. And the other good news is if you look away from goods and look at services, you do see ongoing disinflation in all the categories of services. So that’s a healthy development”²
    • (Powell) “The expectation is that we will see the effects of tariffs flowing through goods prices, peaking, and then starting to come down. Assuming there are no new major tariff increases that are begun. And that’s what we expect to see over the course of this year. If we see that, if we see that, that would be something that tells us that we can—we can loosen policy. Also, if we see something that suggests that the labor market is not stabilizing, that in fact it’s – the downside risks reemerge, or the data just get worse, we’d have to look at both of those. We have a two-sided mandate”

GEOPOLITICS

• A recent trade breakthrough between the U.S. and India, announced on February 2, 2026, represents a significant “reset” in bilateral relations following months of escalating trade tensions³
  • Massive Tariff Reductions: The U.S. is lowering its total tariff on Indian goods from 50% down to 18%³
    • This 50% rate was a combination of a 25% “reciprocal” tariff and a 25% “punitive” tariff imposed in August 2025 due to India’s continued purchase of Russian oil³
  • The Russian Oil Pivot: In exchange for the tariff relief, India has reportedly agreed to halt all purchases of Russian crude oil. To fill the gap, India will pivot to U.S. energy exports and potentially source from Venezuela³
  • The “$500 Billion” Commitment: India has committed to purchasing over $500 billion in U.S. goods and services over the next five years, specifically targeting energy, technology, agriculture, and coal³
  • Move Toward “Zero Tariffs”: President Trump stated that India will begin dismantling its own trade barriers, with the goal of reaching a zero-percent tariff structure for American products entering the Indian market³
  • Regarding next steps in the process:
    • Joint Statement: Commerce Minister Piyush Goyal indicated that a formal joint statement—the “first tranche” of the deal—will be released by February 10, 2026³
    • Legal Finalization: A comprehensive legal agreement is expected to be signed by mid-March 2026³
    • Executive Action: Once the joint statement is signed, the U.S. is expected to codify the 18% rate via Executive Order³
• In a surprise move on January 29, 2026, the U.S. raised tariffs on South Korean imports to 25% (up from 15%)⁴
  • The Reason: The White House accused Seoul of “dragging its feet” on implementing the terms of a trade agreement signed last year.⁴
  • Targeted Sectors: This specifically impacts automobiles, pharmaceuticals, and lumber⁴
• In late January 2026, a major trade war with the EU was narrowly avoided surrounding US interest in acquiring Greenland⁵
  • The Threat: The Trump Administration initially pledged to impose escalating tariffs (10% to 25%) starting February 1st on eight European nations (including Germany, France, and the UK) over disagreements regarding Greenland’s autonomy and military posture.⁵
  • The Resolution: On January 21, President Trump withdrew the threat, citing a new “framework” deal. While details are still emerging, it appears the EU has agreed to prioritize U.S. industrial and agricultural goods in exchange for the tariff removal⁵

[See Below for Disclosures & Annotations]

DISCLOSURES

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

The companies presented here are for illustrative purposes only and are not to be viewed as an investment recommendation.

Tax laws and regulations are complex and subject to change, which can materially impact investment results. LPL Financial does not provide tax advice. Clients should consult with their personal tax advisors regarding the tax consequences of investing.

ANNOTATIONS

1. Invesco. “Kevin Warsh nominated to serve as the next Fed chair”. January 30, 2026
2. Federal Reserve. “Transcript of Chair Powell’s Press Conference”. January 28, 2026
3. Reuters. “India to sign trade deal with United States in March, minister says”. February 5, 2026
4. KED Global. “Seoul on edge over looming 25% US tariffs as talks in Washington stall”. February 5, 2026
5. BBC. “Trump says ‘framework of a future deal’ discussed on Greenland as he backs off tariffs threat”. January 22, 2026