Moneybeat: Reform without rupture

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MARY REICHARD, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat.

NICK EICHER, HOST: It’s time now to talk business, markets and the economy with financial analyst and advisor David Bahnsen. David heads up the wealth management firm the Bahnsen Group, and he is here now. 

Good morning, David. 

DAVID BAHNSEN: Well good morning, Nick, good to be with you.

EICHER: Well now, we've been watching this one for some months now—and the “Two Kevins” story ended exactly where you thought that it would end.

So now Kevin Warsh is officially the president’s pick for Fed chair, we heard that last week. Jay Powell’s term is coming to an end in a little over three months, so it won’t be long before the Senate Banking Committee will be taking up the Warsh nomination. 

But let’s assume that everything goes forward as planned, Warsh does indeed succeed Powell. What actually matters now, from a policy standpoint, about this choice—beyond the politics of how we got here?

BAHNSEN: I’m happy about it. And so to me, the former Morgan Stanley economist, former Fed governor himself, former QE critic, the 55-year-old Kevin Warsh is going to be the next Federal Reserve chair. And I believe that he will come in, as you said and The Wall Street Journal referred to: reform-minded.

And this doesn’t mean abolish-the-Fed reform. It doesn’t mean burn it down. It doesn’t mean drastically even change some of the mandates, which, there’s different things that I would want to do in a perfect world that are above and beyond all of that.

However, what it does mean, I think, is a movement towards the Fed at least operating within its somewhat ambitious mandates with more constraints. And Kevin has editorialized and articulated a vision by which the Fed needs to have a more humble role in the economy. And the immediate introduction of liquidity manipulation via things like quantitative easing and other facilities that they represent, that’s what Kevin has been most publicly critical of, and that’s what I’m most publicly critical of. 

The fact that he’s going to cut rates further and there’s no way he would have got the job if he hadn’t told the President he will, is different. I happen to believe he’s going to do the right thing with rates for the wrong reason, or at least for a different reason than the President wants.

But nobody was going to get this job who isn’t, and so, you know, he’s going to be there longer than President Trump will, and we’ll see over the body of work how Kevin does as the Federal Reserve chair. 

But I will say that I’m very optimistic and pleased.

EICHER: Okay, so we'll be waiting for that transition, but in the meantime, the Fed just held its first meeting of the year 2026 and decided to leave interest rates right where they are. Chairman Powell said that rates—his words—are near neutral, and what that means simply is that they are still restrictive. Beyond that, David, did that meeting tell you anything about how the Fed sees the economy right now?

BAHNSEN: There isn’t a uniformity in the Fed in how they’re seeing the economy, even people that are voting the same way on rate cuts. You know, Waller said he wanted to cut rates because he was worried about jobs, and Miran said he wanted to cut rates, but he’s not worried about jobs.

The thing I took away from the Fed meeting last week was that it was the least Fed meeting to have anything to take away in a long time. The market didn’t move. Bond yields didn’t move. There was no real drama. I don’t even think it was the lead story in financial media.

Now, it happened to come in the midst of earnings season, and you had major companies like Microsoft and Meta and Apple all releasing results. So that was a bigger financial market story. But I would love to be in a world where we have a lot more Fed meetings like that, where they announce something—or in this case announce non-action—and it isn’t a big hubbub. 

But you could go back and check, I believe, over the last 20 Fed meetings and Fed press conferences, that 17 or 18 of them had a whole bunch of volatility and drama and spurts and spikes and this and that. And that’s not healthy, and not what we want to see.

EICHER: So we talked about this a few months ago, David, when President Trump fired the head of the Bureau of Labor Statistics and put in a temporary replacement. Now the BLS is where we get the government core numbers on inflation and jobs—there are some other economic reports we get, but those are the two big ones. 

The news last week was that the president named a permanent successor, still a very institutional choice: longtime career economist, Brett Matsumoto. How important is that decision for confidence in economic data?

BAHNSEN: Well, it isn’t a person that I’m familiar with or know, but the fact that they’re an institutionalist inside with that experience has got to be taken as an encouraging sign.

And, you know, the fact that there isn’t a big social media history is a good thing, not a bad thing. This needs to be as close to a data-driven, a-political, no-frills, no-drama type role as there could be.

We are not asking anyone to interpret this data. So I’m not advocating for this neutrality myth where someone doesn’t have opinions on things. It’s just that this role is the role of someone who’s presenting data from which other people get to go form opinions.

And the person that he nominated originally, when the prior BLS head was fired, had absolutely no experience, no history, was a social media provocateur—by the way, someone I know and have been in the green room with many, many times—but was just hired for this sort of political provocation.

And then the Senate just said, "You know, Mr. President, this isn’t going to happen, so you’re going to need to find someone else." And he did. I think that he’s found now the right person, but at least by their résumé, I like what I see.

EICHER: Okay, so David, quick question on this one. This is becoming so normal, but again, a partial government shutdown underway, another one. This one though tied to a dispute over immigration policy instead of spending levels. So from an economic standpoint, does this one actually matter, or do you just see it as procedural noise?

BAHNSEN: I don’t think this thing that we’re going to go through here counts as a shutdown. Nobody’s really going to notice it. Funding isn’t going to be cut off.

There is a kind of procedural element to it, allowing some Democrats to hit up on ICE. And I think in the meantime, there’s other things moving in Minnesota along the way of what certain people want.

But we’re not talking about something like what we went through back in the fourth quarter.

EICHER: Right. Well we've got about a minute left. Before we go, Dividend Café this week, you write about rebalancing investment portfolios—it's not, you say, a technical exercise, as much as a discipline rooted in humility. 

What is the kind of core idea you would want WORLD listeners to take away from this week's Dividend Cafe?

BAHNSEN: Well, of course, I always love if WORLD listeners want to go to dividendcafe.com and read the article or even subscribe, you know, everything there is free.

But you know, the issue there, Nick, is a biblical principle about humility, discipline, prudence, wisdom, diversification, and some of the ideas that go behind it are all rooted to ideas that I consider to be very biblical.

And no, there’s not a biblical normative about what the asset allocation should be, or what numbers and thresholds and timing the actual mechanics of a rebalance should take place. 

But the idea that we don’t know exactly what will happen next, and so we want to contain our upside and downside within reasonable limits—those are very prudentially wise things to do.

And that’s what rebalancing a portfolio is about, and I make that case in this week’s Dividend Cafe.

EICHER: All right. David Bahnsen—founder, managing partner, and chief investment officer at The Bahnsen Group. He writes at DividendCafe.com of course,I  and at WORLD Opinions. 

David, I hope you have a terrific week. We'll see you next time. 

BAHNSEN: Thanks so much, Nick.

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