Expert David Zervos from Jefferies commented on possible changes in the US Federal Reserve (Fed) and their influence on the stock market during the Power Lunch program on CNBC.
Impact of Fed Structure on Stock Market
Zervos noted that a possible power struggle within the Fed could yield positive effects for the stock market. He stated that changes in the Fed's structure could result in a chairperson advocating for lower interest rates, creating a more favorable environment for markets.
What Might a New Fed Chair Change?
Zervos also discussed that current Fed Chair Jerome Powell's term will conclude in the spring of 2025, during which President Trump could appoint at least two new members. If this happens, four of the seven members of the Fed's board could be Trump-appointed, likely supporting a more 'pro-growth' economic agenda. He referenced Alan Greenspan's low-interest rate policies in the 1990s, suggesting that similar risks may be taken by the new chair.
Market Reactions to Jerome Powell's Statements
The program noted that market interest in Jerome Powell's rhetoric has begun to wane. Zervos pointed out that markets have not shown a significant reaction to Powell's recent signals of a possible interest rate hike, indicating a shift towards a focus on who the next president will be and what actions they might take. Zervos also mentioned Trump's strategy of neutralizing figures he disliked during his presidency, suggesting that Powell is gradually being sidelined.
In conclusion, potential changes in the Fed may impact the stock market in the long run, especially if new appointments align with policies favoring lower interest rates.
