Is A Fed Shakeup The Most Underappreciated Risk?

Is A Fed Shakeup The Most Underappreciated Risk?

Amid a veritable whirlwind of macro concerns and all manner of flashy Facebook headlines, the risk of a "disruption" at the Fed may be underappreciated. Initially, the word "revelations" seemed a bit hyperbolic when it came to discussions about the 2020 trading activities of Robert Kaplan, Eric Rosengren and Richard Clarida. Wealthy people own the vast majority of financial assets in America and post-2008 Fed policy has been a story of asset price inflation. I'm not entirely sure why anyone wa
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8 thoughts on “Is A Fed Shakeup The Most Underappreciated Risk?

  1. It is a tail risk for the short term. Volatility often goes up when you get a new Fed chair- first of all the market is uncertain about what that portends- secondly there is usually a learning curve for a Fed chair- often it coincides iwth a market test within 6 months. Would be surprised if Powell was not reappointed but as you say it is possible. More likely Ms. Brainard will be the new Fed chair in 4 years if Biden is in the chair. If not, she may be the new US Treasury Secretary when/if Yellen moves on in a few years.

    1. Appreciate the comment. I’ve previously commented to H that Powell should not get another term. But “Fed time” moves in extremely slow blinks. And as you note, the current state is not without discomfort. That said, Brainard is a rising presence.

  2. Just one more reason why volatility in the month of October notches up (historically). Govt funding, passing budgets (or not), lead-ups to elections (October surprises), year-end deadlines approaching, Q3 earnings… all conspiring to kick up some dust in one measly month.

  3. And, at least at the headlines level, it’s always about the ‘market’ first when talking about the Fed. Inflation and employment are now represented by the market, other statistics be damned.

  4. I think I’ve posted this before, but mostly I expect the result to be a “dovish” pivot from Jay with commitments to Progressive Fed agenda items as the offering for his re-appointment.

  5. It used to be that there were only a few outright crooks and blatant liars in government but now it appears that easily a majority of officeholders and agency bosses at all levels of government are a bunch of liars on the take. When I mail my 1040ES checks to two governments it makes me furious every time.

    1. I feel the same way about my real estate taxes. The collections in my “little mountain town” has resulted in a boondoggle of real estate developments that we do not need.

      However, since removing organized religions, the Boy Scouts of America, schools built in Asia (see Three Cups of Tea scandal) among others from my list of potential charities that I would consider, the US government seems as good as any.
      Too bad I can’t get a Schedule A deduction for Federal taxes paid (haha).

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