Shadow Fed Chair Waller?

European bond yields rose slightly, while equity markets took a breather after the oil-price inspired rebound, as the truce between Iran and Israel appeared to hold. The dollar index slipped to its lowest level in over three years, as President Trump considers announcing his pick for the next Fed Chairman earlier than planned. This could undercut Powell's ability to steer rates, and markets are pricing in a higher probability of significant rate cuts over the course of 2026. The NATO summit was a success, with members reaffirming their commitment to collective defense and agreeing to invest 5% of GDP annually on core defense requirements by 2035. The commitment is significant, but bond investors seem to be shrugging it off, despite the massive spending impulse it represents. The increase in defense spending will require significant budgetary and financial adjustments, and it's hard to avoid a significant increase in the deficit and government debt issuance. The key to success will be strategic patience, coordination, and innovation, but there are concerns about whether member states will be able to consolidate their debt after the spending binge. The financial burden will need to be fairly distributed, and funding will need to flow to the right sectors to achieve the long-term security and defense objectives. There are no straightforward answers, but it's essential to start thinking about how to make this work without blowing up bond markets. The current budgetary and financial framework may not be able to handle the increased spending, and new solutions will be needed.