RJO FuturesCast

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President Trump will announce the new Fed Chair Thursday afternoon, before he leaves for China on Friday. Jerome Powell, a current Fed governor, is the front runner. Powell is expected to follow in the dovish footsteps of current Fed Chair Janet Yellen. This dovish posture has been a boon to the stock market, and a key driver in lower interest rates. Although Trump has criticized Yellen in the past for keeping rates “artificially” low under Obama, he has stated that he prefers low interest rates and a weaker dollar. Going with Powell will reinforce the belief that the current trajectory of rate hikes will be gradual, as Yellen has mapped out in previous FOMC meetings. The next hike isn’t expected until the December FOMC meeting. We should get even more clarity regarding future moves by the Fed as it wraps up the October FOMC meeting Wednesday at 1pm central. However, there will likely be no surprises as rates are expected to remain unchanged, and the rhetoric is to remain accommodating with an emphasis on gradual rate hikes.

Although Powell is expected to toe the line of the current chair Yellen, there is a stark contrast between him and past Fed Chairs. Powell is a lawyer, unlike the three previous chairs that were all PhD economists. He is said to have learned on the job after former President Obama appointed him Fed Governor in 2012. Like Fed Chairs before him, he is wealthy, but will be by far the wealthiest Fed Chair, believed to be worth 20-50 million. He is a former Carlyle Group executive and investment banker, who is believed to be cozy with the banks and may look to Wall Street as a sounding board. President Trump has repeatedly heralded the strength of the stock market as a successful hallmark during his time in office. With Powell, he is hoping for a steady hand that won’t rock the boat.

Tarik Husseini