Should Investors Worry About a New Fed Chair?

Transcript

Ken Fisher:

So as we enter 2026, knowing that Jerome Powell's time as head of the US Federal Reserve System is coming to an end in May.

The question arises, can a new head of the Fed seriously and significantly alter monetary policy? Now, if you frame the question that way, the answer must be yes. Can it happen? Yes. Does it happen often? No. Will this one? I don't know.

Now think about it this way. The board of the Federal Reserve. The open market Committee of the Federal Reserve. These are making decisions. So one real question is how persuasive is the new head of the Fed? The members tend to give the head of the Fed quite a lot of ear. That doesn't mean they give the head of the Fed quite a lot of control. The head of the Fed needs to try to move them and maybe only nudges them a little. Maybe doesn't try to nudge them at all, or maybe tries to avalanche them. But usually the avalanching doesn't work very well because all of those with a vote tend to have their own views. And while you can try to persuade them and convince them that doesn't deprive them of their own vote.

So what I would say is this president, President Trump, clearly wants to appoint someone, as he's articulated, that is consistent with his views on how monetary policy should be conducted. That's not a shock. He will put that person in if the Senate confirms that person. And if the Senate doesn't confirm that person, he'll try to find another until he finds one that is maybe not what he most wants, but what the Senate will confirm. And then you get to where you find out, hey, does that person really want to do that? Because once that person is confirmed, that person has four years, and that person will know the moment he is confirmed that he's actually not beholden to Donald Trump anymore. He can do what he thinks is best. He can do what he thinks he should.

And when I say he, that's because I don't believe there's anybody that Donald Trump is considering for this position that isn't a man.

So, let me just go a different direction on this. The person that he picks that ends up being confirmed may be very persuasive, and may be able to convince monetary policy among those with a vote to be changed drastically. It usually doesn't happen, because usually what happens is the very large staff of the Federal Reserve have already been in interaction with all of the board members. They've already got those people in a position that those people want to be in. And then with the new head of the Fed, they start working on him. And for the most part, pretty often-- it's true in politics in general--that politicians are seriously impacted by staff. Committees are seriously impacted by staff. Boards are seriously impacted by staff. And the Fed has a huge staff. And most of the time in history, a new incoming head of the Fed has a lot of ideas, and those ideas tend to get sideswiped by being convinced by the staff. No, that's not right. Wants to be like this? No, that's not right. Wants to be like the other.

And so my suspicion is that the person that the president actually gets confirmed to the Senate ends up becoming not as extremist as the president would like in terms of doing exactly what the president wants when the president wants it. But if that person is really persuasive, maybe he will be.

The thing to look for is the persuasiveness versus getting overwhelmed by the views and the education from the staff. And so with that, a big part of my answer is, I don't really know. Can it happen that the new head of the Fed is hugely influential. Yes, Paul Volcker is the poster child for a head of the Fed. That was hugely influential, changing monetary policy with the support of his board members who he convinced. But most of them aren't. And so the odds don't favor extremity, but you might get it.

I wish I had a more conclusive answer for you, but I thought I'd give you some clarity of framework on how to think about it. Thank you very much for listening.

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