3 Investors Weigh In on Fed Chair's Reappointment and What It Means for Buying Stocks

On Nov. 22, President Biden announced that he would be nominating Jerome Powell for a second term as chair of the Federal Reserve. Stocks rose promptly on the news. In this segment of Backstage Pass, recorded on Nov. 22, Fool contributors Jason Hall, Toby Bordelon, and Rachel Warren discuss what Powell's nomination means for investors and the state of the stock market.

Jason Hall: Not a big surprise, but definitely something that market was positive about. President Joe Biden is going to nominate Jerome Powell to remain as chair of the Federal Reserve. I didn't look at the exact number for the total market, but I know at one point the Dow was up 300 points.

That's pretty good for the Dow to move that much in a day. Here's the thing. The markets, they liked it, but do they like it or do they just like the certainty? That's the funny thing about these moves. Sometimes it's just the market.

They know what they're going to get in Powell and they know what they've gotten and he's staying around, so that's good. I don't want to talk about that with you guys though.

What I want to ask you is thinking about this, the Fed share, somebody whose thumb is on the scale of economic policy, and you have other people and other positions throughout the government, when you think about these sorts of things, Toby, I'm going to ask you to kick us off here, how does it affect how you invest or your stock market outlook?

Toby Bordelon: I don't think it does affect the way I invest, really, at least if we get what we're seeing now. I like consistency, which you were talking about. Honestly, I like to see the existing Fed Chair continue, unless there's some obvious reason they should not continue, I don't see that here.

I think if Biden had gone with someone else, that would actually make me somewhat concerning, like why are we switching? Are we now politicizing in the Fed and are we're going to be in a scenario where the President actually does matter because they're going to change the Fed Chair into some politically minded agenda focused person.

As long as we get the Fed doing what they do and they're consistent and they just do their thing with as little political interference as possible, I think I'm good, I don't pay that much attention to it. As for my outlook on the stock market, I don't know, more of the same for the next five years it's a five-year term, right? Sure, let's just go another five years with this good market with some volatility every now and then.

Jason Hall: Rachel what about you? 

Rachel Warren: l agree. Certainly, isn't going to change anything about how I invest. I think that investors probably liked this. I think right now we're in a time where things are uncertain and I think that anything that foreshadows consistency and certainty is something that the market really likes, and I think that was evidenced in the market's reaction today.

In terms of who's in the Fed Chair, it definitely doesn't impact how I invest or my stock market outlook. I think that I would definitely continue to buy stocks the way I always buy stocks regardless of who is sitting in that role.

But I think that as for my stock market outlook, more of the same in the coming years would be great, and I agree with Toby on that, and I know that we may or may not be due for another correction soon. Some of my favorite stocks recently have been trading down, ones like Teladoc and Zoom that I talk about a lot.

But over the long term, I think those companies can produce exceptional returns. For me, it's definitely about staying consistently invested, and I hope we have another really robust decade ahead, but I'm in it for the long haul, so whether we have a bumpy period or not, I'm not going to change how I buy stocks.

Jason Hall: I think a couple of things there right, talking about stocks. At the end of the day, as Foolish investors, we're buying for three plus, five plus, 10 plus, 20 plus years. That's the idea. We look at these companies and their ability to sometimes be timeless or disrupt, generate wealth overtime, create wealth, create something new, disrupt some status quo and build some new industry, change existing industries for the better, all of the things that we talk about, right. 

Those things really don't care who's Chairman of the Fed or who is running the treasury.

Rachel Warren: Right. 

Jason Hall: For me, again, I'm still in my 40s, still measuring all my investing goals in decades. That's the thing. But I do think there is a little bit of nuance.

If you're somebody who maybe has a certain part of your portfolio that's heavily based on fixed income for some reason, because you are thinking about protecting losses, you're preserving capital and looking for some meaningful return, thinking about who the Fed chair is and what their policy might be on interest rates, how that could be affected.

You have to be at least aware of that because at the end of the day, if you're thinking about fixed income from bonds and yields and that sort of thing or even for dividend stocks because the yielded stocks, there is some tension between bond yields and stock yields because they do "compete for some of those marginal dollars for income".

I think in general, it's just the thing, but it's good to be aware of it and what are their economic policies. That's about it for me.