"Shadow Fed" Could Boost Tech

Markets are increasing the odds that the Fed will cut sooner and more aggressively, potentially as soon as a new Fed Chair is nominated, which could help tech stocks.

Finding a Way to Push Change

US President Donald Trump wants lower interest rates, but Fed Chair Jerome Powell is reluctant to cut them. After floating the idea of firing the Fed Chair, Trump has decided to wait out Powell's term until May of next year—but not idly. The President said he will announce his . While it is normal to announce a successor relatively early to provide continuity for the markets, a full 11 months before Powell's term ends is unprecedented. It has sparked talk of establishing a "Shadow Fed", where the Chair-in-waiting could undermine Powell by signalling to the market and might even lead a revolt within the Fed to push rates lower.

The concept should not be confused with the already existing , which is a private group of economists that provides alternative perspectives on the Fed's actions. Although Trump hasn't explicitly stated so, analysts and markets understand that an early nomination of a candidate for Fed chair is intended to put . US Treasury Secretary Scott Bessent has said that it is the Administration's goal to reduce yields on the 10-year benchmark rate.

Markets are Moving up Rate Cuts

Markets already anticipate under a new Chair. With barely two cuts pencilled in for this year, the bar for next year has been raised to around five cuts after May 2026. Of course, by then, we will have a much clearer picture of what impact tariffs will have on inflation. Powell has repeatedly stated that the reason for holding rates unchanged is the uncertainty surrounding price pressures resulting from the trade war. He added that the Fed would otherwise cut rates similar to last year when it conducted 100 bps of easing.

Despite the view of a longer–term impact, the market cut from around 70% to over 90% and is now pricing in a majority chance of a second cut in December. Lower rates would presumably support higher-valued stocks, such as . Lower borrowing costs would help companies with large capital expenditures as they look to expand their AI capabilities.

Nvidia in Record Territory

Despite trading in record territory, Nvidia may be forming a broadening triangle pattern, known as a “megaphone.” While prices remain above the $150 per share peak reached in early 2025 and the $135 support (the first triangle peak), NVDA could extend to the upper trendline near $175. This would expose the $200 round resistance next, but the timing of a potential price–trendline interaction is also important. A rejection at the upper trendline or a premature reversal due to an overextended RSI could see prices test the 200-day moving average near $130, with a breakdown suggesting a shift to a bearish market in the longer term. Such a move could bring the troughs of $100 and $95 back into the spotlight.

Source: SpreadEx | Nvidia

Key Takeaways

Markets are expecting the Fed to cut sooner and faster, potentially as soon as a new Fed Chair is nominated, as the "Shadow Fed" concept has sparked speculation about lower rates. Meanwhile, Trump’s move might be an attempt to undermine Powell, who has been reluctant to cut rates. Still, markets are already pricing in around five rate cuts after May 2026, when Powell's term is set to end. Lower rates are expected to support higher-valued stocks, such as NVIDIA, which hit an all-time high on Friday. However, its “megaphone” pattern suggests potential resistance around $175.