Feb 5, 2026 3:05:15 PM
Strong GDP headlines are masking some important underlying dynamics, from gold-driven export noise to a weaker U.S. dollar. This update unpacks what’s really driving growth expectations, what Kevin Warsh’s potential Fed leadership could mean for rates, and where credit unions are finding opportunity in today’s yield curve.
Why GDP Growth Looks Stronger Than Expected
A central theme in the economy over the past year has been GDP growth consistently coming in higher than expected or forecasted. The Atlanta Federal Reserve runs a model called GDPNow, which collects incoming economic data between official GDP releases to estimate the next print. Currently, GDPNow is forecasting between 4% and 5% GDP growth for Q4, well above the long-term average of roughly 2%. At the same time, the Blue Chip Consensus—based on surveys of economists and corporate finance professionals—is forecasting closer to 1% growth. That divergence raises an important question: what’s driving the difference?
The Role of Net Exports in the GDP Forecast
When we break down the GDPNow model into its components—consumer spending, residential investment, nonresidential investment, private inventories, government spending, and net exports—we see something interesting. Prior to January 8, forecasts were tracking around 3%, in line with prior quarters. After January 8, nearly the entire increase in the GDP forecast was driven by net exports.
Gold Exports and Distorted Growth Signals
Economic data always arrives with a lag, but the explanation here is fairly straightforward. In September 2025, net exports increased by approximately $9 billion. Of that total, about $6 billion came from non-monetary gold exports, with another $3 billion from pharmaceuticals.
These trends normalized somewhat in November, which flowed through to the forecast model and brought projected growth down from roughly 5% to closer to 4%. Still, it’s clear that much of the recent volatility in GDP forecasts is being driven by gold exports. Notably, the price of gold has increased by more than 40% over the past six months.
The Weakening U.S. Dollar and Inflation Implications
At the same time, the value of the U.S. dollar has declined amid geopolitical uncertainty and ongoing fiscal brinkmanship. Historically, a strong dollar has been viewed as a sign of U.S. global strength and reserve currency confidence. However, a weaker dollar can make U.S. exports more competitive internationally and supports efforts to reduce the trade deficit—an important priority for the Trump administration.
When demand for U.S. dollars weakens, foreign investors often look for alternatives, including gold. In effect, investors are shifting away from U.S. Treasuries toward gold at a scale large enough to distort economic growth models.
One important knock-on effect is inflation. A weaker dollar reduces purchasing power, which can push prices higher. This dynamic benefits debtors—such as a government running record deficits—but also tends to lift asset values. Some portion of recent real estate and equity appreciation may simply reflect a dollar that is worth less than it was a year ago.
This environment risks aggravating the affordability crisis for households already under balance sheet strain, while simultaneously amplifying the wealth effect for those who benefit from rising asset prices.
Kevin Warsh’s Nomination as Fed Chair
President Trump recently announced his nomination of Kevin Warsh to be the next Chairman of the Federal Reserve. Current Chair Jerome Powell’s term ends in May, after which he may remain on the Federal Open Market Committee for an additional two years.
Kevin Warsh previously served on the Federal Reserve from 2006 to 2011 and was part of the team that navigated the Global Financial Crisis. He resigned shortly after Chair Bernanke announced that the temporary measure of quantitative easing would become a permanent policy tool.
Warsh is widely viewed as an inflation hawk, generally favoring more restrictive monetary policy. This is somewhat surprising given President Trump’s public preference for aggressive rate cuts. It remains to be seen how much Warsh’s views may have evolved.
Warsh’s Policy Views: Inflation, QE, and AI
In recent commentary, Warsh has argued that today’s inflation is driven more by excessive government spending and money creation than by households earning and spending more—a perspective that aligns with the concept of fiscal dominance.
Consistent with his long-standing objections to permanent quantitative easing, Warsh has advocated for shrinking the Fed’s balance sheet, arguing that doing so would create room for lower interest rates. This stance contrasts with recent proposals for Fannie Mae and Freddie Mac to purchase approximately $200 billion in mortgage-backed securities and may prove difficult in practice, given recent liquidity stresses during quantitative tightening.
Warsh has also suggested that advances in artificial intelligence could be disinflationary over time due to productivity gains. He views much of the current inflation pressure as one-time noise related to tariffs—a view that Chair Powell has also echoed.
Why Warsh, and What Comes Next
Our best guess as to why Warsh was selected is that efforts to bring down long-term yields have largely been unsuccessful. Markets tend to have greater confidence in inflation hawks, which can make future policy rate cuts easier for markets to absorb.
What remains uncertain is how effective Warsh would be at coalition-building within the FOMC. While recent policy votes have been divided, a majority of governors appear broadly aligned with Chair Powell’s current views on inflation and the economy.
Warsh’s confirmation is also not guaranteed. Senator Thom Tillis has stated he will block any confirmation vote until the Department of Justice investigation into Chair Powell is resolved—a position rooted in protecting Federal Reserve independence rather than opposition to Warsh himself.
Yield Curve Update and Investment Considerations
Let’s wrap up with a look at the yield curve and current investment opportunities. So far this year, we’ve seen relatively little volatility in the yield curve. Rates are down slightly week over week, driven in part by softer employment data and uncertainty around Fed leadership.
The 10-year Treasury has found support around 4.25%, with occasional moves slightly above that level. On the investment side, CD specials offering 4% or better are largely gone in direct placement markets, though some opportunities still exist on direct platforms.
We are beginning to see more relative value in brokered CDs, including attractive offerings in the 18-month, two-year, and even three-year range that compare favorably to direct placement CDs. It’s worth shopping across platforms to ensure you’re seeing the full opportunity set.
We’re also seeing increased investment activity in bond portfolios, particularly as credit unions prepare for potential downward rate scenarios. In a bull steepener environment—where short-term rates fall but longer-term rates remain elevated—structures with limited prepayment and extension risk and average lives under three years are yielding around 4.25%. For those willing to accept slightly longer average lives, opportunities above 4.5% are available.
This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events of a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. IOnforrmation is basewd on data gathered from whatr we believe are reliable source. Past performance is not a guarantee of future results.