Federal Reserve Chair Janet Yellen is set to be replaced by President Trump's nominee, Jay Powell. However, it might not be as much of a change as you think.
A full transcript follows the video.
This video was recorded on Dec. 18, 2017.
Michael Douglass: Story No. 1: Jerome Powell as the new Fed chair.
Matt Frankel: This was not unexpected. President Trump did not renominate Janet Yellen, which set off a big wave of speculation -- is he going to nominate somebody more conservative or dovish, I guess you would say. But he nominated Jerome Powell, who's pretty much, it was his best choice for making a change without actually making a change, is the best way I could put it. Nothing really changed in terms of expectations. Before he was nominated, the markets expected three interest rate hikes in 2018, for example. They still expect that. Not much has changed, which is a good thing. If it's not broke, don't fix it. But this was President Trump's way of putting a little bit of a change at the Federal Reserve without actually making too much of a ruckus about it.
Douglass: Yes. Yellen and Powell, I think they can best be characterized as centrist and a little dovish. And by that what I mean is, doves tend to be very measured about raising interest rates, sometimes even want more fiscal stimulus, whereas the hawks tend to be more in favor of raising interest rates to keep up with American economic growth. So Yellen, and now Powell, have tended to say, yes, we're going to do some interest rate increases, but they're going to be very slow and very measured. We do not want to disrupt this economic recovery.
Frankel: Yeah, definitely. Basically, they don't want to add to any uncertainty that already exists. Between tax reform, things like North Korea, there are a lot of things that could cause volatility in 2018, but the Fed probably won't be one of them.
Douglass: Right. And when thinking about this story, that's probably the key investing takeaway: The Fed is not going to be contributing to volatility next year, as far as we can tell. Of course, no one can predict the future, etc. But we have no reason, based on Jerome Powell's history, to think that the Fed is going to be anything but a stabilizing force next year and in the years to come.
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