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: 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.”

MarketMinder’s View: This article covers byelections in three ridings (districts) in Canada, so please keep in mind that we favor no politician nor any political party, assessing matters solely for their potential market effects. Here is the issue: Since taking office last spring, Prime Minister Mark Carney has sat atop a minority government—perhaps parliamentary democracy’s deepest form of gridlock. But now, after five defections from other parties to his Liberals and these byelections, his minority has swung to a majority. Hence, “Fewer than half of the government bills introduced over the last year have become law — a figure that is expected to increase in short order now that Carney won't have to cajole other parties to back his policies.” Many are talking up legislative plans and ideas, pushing for a more active government. If that holds, it could increase political uncertainty to an extent in Canada, a potential headwind as stocks weigh the possibility of rules changes that affect investment plans. But here is the thing: Even after the byelection victories in all three ridings, the Liberals have a five-seat edge (174 – 169). That is quite narrow and will require Carney to rein in any backbench dissent. Given the defections amount to all of that edge, it isn’t hard to see the party struggling to advance divisive plans. Gridlock obviously isn’t as entrenched in the Great White North as it was a month or two ago, but we think this narrow edge is still a brake on big change, which is bullish enough.