The Warsh Effect

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Hello Peter Anthony Hovis,

The Warsh Effect

The prevailing winds over Wall Street shifted violently this Friday as President Donald Trump officially nominated Kevin Warsh to succeed Jerome Powell as the next Chair of the Federal Reserve.

This announcement, coming as Powell’s term nears its end in May, sent a jolt through a market that had grown comfortable with a certain rhythm of easing.

While the S&P 500 managed to close its best month since October, the final session of January was defined by a massive “debasement trade” unwind. The dollar surged 0.9%, marking its most aggressive rally since last May, while the gold fever that had recently gripped investors broke in spectacular fashion.

(Photo: Tierney L. Cross | Bloomberg | Getty Images)

The reaction was a study in duality.

On one hand, the pick of Warsh—a 55-year-old former Fed governor with deep Wall Street ties—was seen as a victory for institutional stability. Krishna Guha at Evercore noted that the choice should “reduce, though not eliminate, the asymmetric risk of deep extended US currency weakness.”

However, that same reputation as an inflation hawk is precisely what sent precious metals into a tailspin. Gold suffered its largest single-day slide in decades, tumbling more than 11% to settle near $4,745 an ounce, while silver plummeted over 35% in a historic intraday crash.

For an asset class that had recently topped $5,000, it was a sobering reminder that “nothing goes up forever.”

Equity markets followed the downward draft, with the S&P 500 falling 0.4% and the tech-heavy Nasdaq dropping 0.9%.

The selling was particularly acute in the mining sector, where giants like Newmont and Freeport-McMoRan shed 11.5% and 7.5% respectively.

Yet, beneath the red screens, some analysts urged calm.

Seema Shah at Principal Asset Management suggested the hawkish interpretation might be “overly simplistic,” noting that it is “unlikely he would have been selected without signaling a willingness to consider additional rate cuts this year.”

Seema Shah at Principal Asset Management (Photo: CNBC)

This sentiment was echoed by those who view Warsh not as an ideologue, but as a “bridge to Wall Street” who understands the pragmatic needs of the modern economy.

The bond market offered a mixed verdict on the news, which reflected a “bear steepening” dynamic where long-term Treasuries underperformed. While two-year yields edged lower on hopes for near-term cuts, the 30-year bond yield rose to 4.89% as investors grappled with Warsh’s desire for a leaner Fed balance sheet.

Jeffrey Roach at LPL Financial offered a reassuring take for those worried about political overreach, stating that “Warsh is a safe pick. He’s forthright, willing to rethink convention, and not necessarily a ‘yes-man’… Investors should be thankful.”

As the month closes, the narrative has shifted from “how low can rates go” to “who is steering the ship.”

Mark Malek at Siebert Financial perhaps captured the investor mood best, acknowledging that while the day felt messy and the plot had thickened, the move toward a more predictable, transparent central bank is a net positive.

“If this leads us toward a world where fundamentals reclaim the spotlight and capital is priced a little more honestly, that is not a bad trade-off at all,” he concluded.

For now, the market is “Warshing and waiting,” looking ahead to a new era of monetary policy that promises to be more unpredictable yet fundamentally orthodox.

How CAVA’s “Unit Economic Engine” is Self-Funding a 1,000-Store Empire

Today’s Stock Pick: Cava Group (CAVA)

Think of Cava as the company that’s doing for Mediterranean food what Chipotle did for Mexican.

They’ve essentially built a powerhouse in the “fast-casual” space by taking those healthy, bold flavors from the Mediterranean and serving them up in a way that’s fast, customizable, and actually makes you feel good after you eat it.

So, the heart of their business is a chain of over 400 restaurants across the country where people go to build their own bowls and wraps. It’s a model that’s hitting a massive sweet spot right now because it taps into this huge trend toward “health and wellness” without sacrificing flavor or convenience.

(Source: CAVA)

But what makes them interesting is the “unit economic engine” they’ve built.

They are expanding fast, with a goal of hitting 1,000 locations by 2032, and the crazy part is that they’re funding much of this growth through their own success. Each new restaurant is pulling in high average sales and healthy margins, which gives them the cash to keep opening doors without drowning in debt.

They also have a foot in the door at your local grocery store, selling their signature hummus and dressings, which keeps the brand on people’s minds even when they aren’t at the restaurant.

Between their “connected kitchen” tech that speeds up digital orders and a massive loyalty program, they’re basically building a modern, tech-forward version of a restaurant chain that’s designed to scale for the long haul.

All in all, there are three words to describe this company: Growth, growth and growth.

Cava is opening restaurants rapidly around the country. There was an 18% increase in total Cava restaurants YoY in the recent quarter, with 17 net new Cava restaurant openings.

The quarterly growth has also been steady since Q3 2024:

(Source: Cava)

What makes Cava an even more attractive investment is that it is still in its early innings. They only opened restaurants in Southern California. They recently opened a restaurant in Oakland in NorCal. New York only has under 20 restaurants.

The growth story is intact for the 2025 fiscal year. Same restaurant sales growth is expected to post 3% to 4%.

(Source: Cava)

Bottom line: Cava has cracked the growth code. All it has to do is to keep opening restaurants around the country. This stock is worth your attention if you love a growth story.

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