Well, this shouldn’t come as a surprise but Donald Trump is reportedly leaning towards Jerome Powell for the Fed chair.
Just hours after Janet Yellen left the White House, Politico reported that Powell is the leading candidate. That’s according to an official who “cautioned that Trump has not made a final decision.”
You’ll recall that Powell is said to be Steve Mnuchin’s favorite. This is a dovish sign for markets and that was immediately reflected in the dollar and yields as the news crossed:
As Bloomberg notes, UST futures volumes surged on the news, with ~85k contracts trading over a 1- minute period in sharp move from 125-05+ to 125-14; 10Y yields dropped back through 2.31%.
Here’s more from Politico:
Of the five finalists, Powell would likely face the least opposition to confirmation in the Senate, according to interviews with nearly a dozen members of the Banking Committee.
That is not to say he is the most popular choice among all the senators, but he has the benefit of being a Republican with private sector experience – a pull for GOP lawmakers – and a current member of the Fed board who has voted with Yellen on monetary policy decisions and post-crisis financial rules, a point in his favor with Democrats.
Betting odds now show Powell as the overwhelming favorite:
Kevin Warsh is a distant second, but at this point, it seems abundantly clear that someone has told Trump that Warsh would likely usher in an unceremonious end to the President’s beloved stock market rally.
John Taylor – who everyone was talking about just days ago – has been all but priced out.
For those in need of a refresher on the market implications, here’s Deutsche Bank’s handy guide:
Did not kiss Trump’s loyalty ring – no check mark. Did not sign the secret loyalty oath contract – no check mark. Off with her (as) head – of the FED.
Trump is “leaning…” or twirling or maybe prognosticating…He is, instead, doing what he always does…drawing attention to himself and his convoluted and ever mercurial decision making process.
Don’t count out Warsh…Trump knows the family and he always falls back onto what is comfortable.
In the next few months Donald will try and fathom who is least likely to betray his vision for the economy…which is to say..Who will do his rep and his holdings the most good? Who knows..he might even choke to death on a Turkey bone while eating and explaining how he invented Thanksgiving and came up with the idea of roasting them for the joyous occasion.
But Warsh is likely to “betray [Trump’s] vision for the economy”… the low-interest, negative-real-rates economy that trump likes. As well as an end to “the President’s beloved stock market rally.” In the words of Jim Grant a year ago, Trump will come to “love the bubble market”. Indeed.
Warsh has about as much chance of Fed Chair as PBOC Governor Zhou. Both of whom speak too candidly about reality that American’s don’t want to face. Ironic given America is now led by a reality TV host… lol.
The powell story is bad news and depressing. Please not another Wall Street crony in the pocket of the financial elites and on-call from the White House.
Ppl instead deserve a genuine independent outsider in the Fed Chair this time… how about Marc Faber! 😀