Daily Commentary

MarketMinder’s View: As we discuss the potential implications of the titular threat, please note MarketMinder is nonpartisan, favoring no party nor any politician, and focuses solely on political developments’ likely market ramifications, if any. At this point it isn’t a secret US President Donald Trump disagrees with Fed Chair Jerome Powell’s leadership, which is why he nominated former Fed board member Kevin Warsh to replace Powell when his term as chair ends in May (pending Warsh’s Senate confirmation, which remains in limbo as this article notes). In addition to stating he will stay on as caretaker Fed head if Warsh isn’t confirmed once his chairmanship ends May 15, Powell, has hinted he may stay on the governing board beyond that since his term there doesn’t expire until January 2028. Seemingly in response today, Trump said he would fire Powell if he lingered (in which capacity, it isn’t clear, as the article notes). But is there anything market moving here for investors? We see all this as a tempest in a teapot. Trump has been trying to remove Powell—and remake the board generally—for months. This is just a continuation of that. The key question, though, is: Can he? In a separate case before the Supreme Court, Trump is arguing he can fire another board member, Governor Lisa Cook, which could create a precedent for Powell, too. But as the article concludes, “The Supreme Court is currently weighing her case, but based on the oral arguments held in January, the justices appear wary about any perceived incursion on the Fed’s ability to set interest rates free of political meddling.” And in a case last summer involving the termination of heads of other agencies, the Court went out of its way to cite the Fed’s legal construction setting a high bar for elected officials removing Fed policymakers. While worth monitoring, the status quo markets are familiar with doesn’t appear likely to be overturned any time soon. More broadly, we are talking about 2 seats of 12 on the Federal Open Market Committee, which steers monetary policy by consensus. This structure greatly limits any president’s influence over monetary policy.

MarketMinder’s View: Does this tell investors anything they don’t already know—and that markets haven’t already priced? “[T]he IMF presented three growth scenarios: weaker, worse and severe, depending on how the war unfolds. Under the IMF’s worst-case outlook, the global economy teeters on the brink of recession, with oil prices averaging $110 a barrel in 2026 and $125 in 2027. The IMF chose the most benign scenario for its World Economic Outlook ‘reference forecast,’ which assumes a short-lived conflict and oil prices normalizing in the second half of 2026, with an $82 per-barrel average for the year—well below Tuesday’s benchmark Brent crude futures price of around $96.00.” As for the middle “worse” path, the IMF envisions a longer conflict with oil staying around $100 and global GDP growth of 2.5% this year instead of the benign scenario’s 3.1%. But even in the “severe” adverse scenario the IMF is leaning to, it still projects 2.0% growth, which doesn’t seem to square with “the brink of recession,” as the article claims. A few things for investors. First, forecasts are only ever opinions—the IMF’s imprimatur doesn’t make theirs any more valid than others even if it helps garner more headlines. Second, the range of scenarios offered here—and waffling between them—shows how imprecise the prediction game is. But third, that doesn’t mean they don’t have value for investors because “official” forecasts/opinions color sentiment, which is where the chief economist’s warning that the adverse scenario looks increasingly likely comes in. The more airing this opinion gets, the more you know markets have dealt with it, which is noteworthy considering the S&P 500 and MSCI World Index regained pre-war highs Wednesday. It looks to us like stocks have spent the past month and a half dealing with worst-case scenario projections and then moving on despite all the ceasefire and blockade twists and turns.

MarketMinder’s View: This article dives a bit into politics and personality politics in particular, so please note MarketMinder favors no politician nor any political party. This discusses the looming confirmation hearings for would-be Fed head Kevin Warsh, who is slated to ascend to the post—if confirmed by the Senate—in May. Yet there are reasons to think that timing is in question, raising hackles around who may lead the institution after current head Jerome Powell’s term expires. Powell says he will, in keeping with past precedent. Some pundits say the administration may challenge that on legal grounds. But the key piece of this article actually comes late and it shows you why that debate is a sideshow. The central issue here is whether monetary policy is conducted independent of elected officials’ interference. Powell, as noted in this piece, can stay on the policy-setting Federal Open Market Committee until 2028. No one questions that. Fed heads usually don’t stay on after their chairmanship expires, but they can and have. If Trump pushes on him hard, he may choose to as comeuppance. But either way, “Even if Trump stakes and wins a claim to appoint an interim head of the Federal Reserve’s board, he is unlikely to get to control the committee that determines the central bank’s decision-making on interest rates.” The voting members are largely set already. And, “Even if a dispute erupted over who chairs the Fed’s board of governors, Powell could continue to run monetary policy through the FOMC — limiting the practical impact of any White House challenge on interest rates, at least in the near term.”