Biden Likely to Renominate Powell as Fed Chief, Say Online Betting
This commentary was issued recently by money managers, research firms, and market newsletter writers and has been edited by Barron’s.
Special Commentary
Wells Fargo
Sept. 16: Jerome Powell’s term as chair of the Federal Reserve is scheduled to end in February, and President Biden will need to decide whom to nominate. Should he stick with Powell or go with someone else?
Online betting markets give Powell a probability in excess of 85% of being renominated, with Fed Governor Lael Brainard a distant second at roughly 10%. These probabilities seem reasonable to us.
In our view, there is little difference in the monetary-policy views of Powell and Brainard. The latter has never dissented from a Federal Open Market Committee decision in her seven years on the Board of Governors, and we would classify both as “dovish.”
There is more difference in the regulatory views of the two front-runners. Brainard has dissented 23 times since 2018 on regulatory-policy votes. Her dissents have largely come on votes relating to the easing of regulations that were put in place in the wake of the 2008 financial crisis.
A stricter regulatory environment, should one be adopted, could potentially exert some marginal downward pressure on loan growth. That said, it likely would take a radical change in regulatory policy, which does not appear to be in the offing, to have a discernible effect on lending and the economic outlook over the next few years.
We would not be inclined to make any changes to our economic outlook if President Biden chooses either Chair Powell or Gov. Brainard.
—Jay H. Bryson, Sarah House, Michael Pugliese, Hop Mathews
Bearish Sentiment: Bullish Sign
The McClellan Market Report
McClellan Financial Publications
Sept. 16: With rising worries about September’s bad reputation for the stock market, and with a small drawdown in stock prices, investors seem to have suddenly turned a lot more bearish. That bearishness constitutes fuel for sustaining an uptrend, as all of those bears will turn into buyers as they flip back to a less bearish stance.
Some analysts like to track the spread between bulls and bears in the weekly AAII [American Association of Individual Investors] Investor Sentiment Survey, and I watch that, too. But I also find that looking at each of them separately can be useful.
[The latest reading] is the highest reading for the bearish percentage since October 2020, when we were still just recovering from the Covid crash and investors were still terribly pessimistic. This is a bottoming sort of indication for stock prices….
Normally, it takes actual downward price movement to turn people to a more bearish state. We haven’t had much of that this time. I suspect that the rise in bearishness this year has been fueled by more discussion than normal about weak seasonality in September.
—Tom McClellan
Dollar Weakness Ahead
The Market Strategy Radar Screen
Oppenheimer Asset Management
Sept. 13: The Bloomberg Dollar Index, a weighted…
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