by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment begins with a discussion of President Trump’s pick for the vacant Fed governor seat. We will then turn to other key stories shaping the market, including our thoughts on the ongoing disagreement over the US-Japan trade agreement, OpenAI’s latest update, and why tariffs are impacting gold prices today. We will conclude by assessing other major international and domestic developments affecting financial markets.

FOMC Shake Up: President Trump has selected Stephen Miran as his pick to fill the vacant seat on the Federal Reserve Board of Governors. Miran currently serves as the head of the Council of Economic Advisers and is expected to help the president push for lower interest rates. While he still needs Senate confirmation, the chamber is currently controlled by Republicans, which likely improves his chances. Miran was previously confirmed for his current role by a vote of 53-46.

• This move could trigger another FOMC dissent if rates remain unchanged in September. Historically, a Fed Chair facing four dissents from governors is seen as losing confidence and often prompts a resignation. So far, two officials, Christopher Waller and Michelle Bowman, have broken ranks. If Miran joins them, it would mark a critical third vote, edging closer to that symbolic threshold.
• A more dovish Fed is likely to push for additional rate cuts, which should support bond prices in the near term. However, lower rates may also lead to a higher term premium, as investors could demand greater compensation due to rising inflation expectations and the growing supply of bonds from widening deficits. While we remain cautiously bullish on long-term bonds in the short run, the longer term outlook is uncertain, primarily due to fiscal concerns surrounding the deficit.
• That said, in a related development, Fed Governor Christopher Waller has emerged as a leading candidate to succeed Jerome Powell as chair of the Federal Reserve. If nominated, Waller would effectively serve as a “shadow Fed chair,” helping to signal the central bank’s policy direction to markets ahead of Powell’s eventual departure.

Tariff Adjustments: The White House will change its trade agreement to prevent the stacking of tariffs on Japanese imported goods, therefore stopping new tariffs from being added to existing ones. This decision comes at the insistence of Japan, as this provision was explicitly included in the European Union agreement but not in the one with Japan. Excessive tariffs are expected to be refunded.

• A significant amount of the confusion surrounding the agreement is due to the absence of a written document. However, this lack of a written agreement may suggest that trade negotiations could continue.
• Despite announced agreements, we anticipate more closed-door discussions on contentious issues such as each country’s investment pledges. These conversations will likely be kept quiet until negotiations are finalized to shield the market from any signs of uncertainty.
• Even so, this informal approach to trade talks doesn’t alter our outlook. We anticipate the president will prioritize market stability and avoid any trade policies that could disrupt the economy.

Gold Prices: The US has imposed tariffs on one-kilogram gold bar imports in a move that has contributed to a sharp rise in bullion prices. The tariffs are likely to negatively impact Swiss gold manufacturers, who play a significant role in melting gold for sale in the London and New York markets. Swiss Gold was initially assumed to be exempt from tariffs, similar to other commodities, including certain classifications of bullion. The move highlights the president’s push to establish more manufacturing in the US.

Open AI Upgrade: OpenAI has launched the newest version of its language model, GPT-5, in an effort to enhance its competitive standing. The model’s primary updates include a focus on improving its code-writing ability, a field where competitors like Anthropic have excelled. It also features new reasoning capabilities designed to reduce hallucinations — the generation of fabricated information. This release is expected to serve as a benchmark for the technology’s performance amid growing business interest.

Taiwan AI Exports: Despite a strong currency and a 20% US tariff rate, which is higher than many of its neighbors, Taiwan has surpassed its full-year trade surplus record in just seven months. This surge was largely driven by the export of AI-related goods, for which demand has been exceptionally high, and by customers rushing to place orders ahead of the tariff deadline. While the next few months may see a slowdown for Taiwanese goods, we still believe that exports related to AI will continue to grow, even in the face of trade uncertainty.

Gaza Takeover: Israeli Prime Minister Benjamin Netanyahu has announced plans for the country to take over Gaza City. The decision reportedly goes against the advice of his own military, but Netanyahu has stated that it is essential for driving Hamas out of power and providing security for Israel. His plan includes the return of hostages, the creation of a temporary Gaza administration, and the eventual handover of the region to Arab forces. The move is likely to lead to global criticism but unlikely to impact markets in the short-term.

Armenia-Azerbaijan: President Trump is scheduled to meet with the leaders of Armenia and Azerbaijan to mediate a peace agreement. The two former Soviet countries have a long history of conflict over territory, particularly the Nagorno-Karabakh enclave, which Azerbaijan fully recaptured in 2023. This decision to hold talks underscores the president’s preference for managing global tensions through diplomatic deals rather than military intervention.

Redistricting Fight: President Trump continues to play an active role as states prepare their electoral maps for the 2026 midterm elections. Notably, he is advocating for the exclusion of immigrants from census counts — a controversial position that would likely face immediate legal challenges. The redistricting debate has intensified as Texas advances proposals that could create five additional GOP-favorable congressional districts.

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