Smooth Transition of Power at the Fed

Today President Trump announced his selection to be the next head of the U.S. Central Bank, and Chairman of the Federal Reserve, Jerome Powell. The new Fed chair will hold many distinctions which will separate him from his predecessors.

Of the nine individuals leading the Fed since the end of World War II, Powell is the first chairman who is not an economist. Powell, in fact, will be the first investment banker to take the reins of the most powerful central bank in the world. Furthermore, he will be one of the wealthiest individuals to hold this position.

Although Janet Yellen has a net worth estimated at $14.6 million, far exceeding the net worth of Bernanke (2.7M), Alan Greenspan (4.5M), and Paul Volcker (142,500), their collective assets are still dwarfed considering Jerome Powell’s current assets.

According to Bloomberg Markets, “Most reports have pegged his wealth at as much as $55 million. His actual net worth could be double that. The $55 million figure comes from his most recent financial disclosure form. But that form leaves off much of the value of what is likely Powell's largest asset, his investment in the Vanguard Total Stock Market index fund.”

This falls in line with this administration’s propensity to utilize the brainpower of some of the country’s wealthiest individuals. These individuals include Rex Tillerson, Wilbur Ross, Stephen Mnuchin, and Gary Cohn.

This, of course, raises the question of the new Fed Chairman’s sensitivity to the wealth and income gap that is one of the most profound divides within our nation.

In an article penned by Stephen Gandel, he highlighted the fact “that yet another one of Trump’s appointments is a member of the nine-figure club.” These individuals by virtue of their wealth have a unique focus that this administration and its most trusted advisors share. “Trump and his closest advisors look at the economy from the top down. The view from up there can make it hard to focus on what’s best for those who are looking up”.

Although it is widely expected that Powell’s leadership will be in line with the current monetary policy and thinking of Janet Yellen’s Federal Reserve, he differs in his view of existing regulations and is much more in line with the president than that of the outgoing Fed chairperson.

Inasmuch as market participants have factored in, and for the most part approved of Jerome Powell, market reaction was remarkably muted. Gold prices moved from being slightly higher on the day to moving slightly lower, and as of 4 o’clock EDT, gold futures are currently fixed at $1276.80 for a decline of $0.50 on the day.

Wishing you as always, good trading,