Daily Commentary

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.

MarketMinder’s View: The producer price index (PPI) for March was expected to broadly soar on the war. Didn’t happen. “The producer price index, a gauge of pipeline costs for final demand goods and services, increased a seasonally adjusted 0.5% for the month, well below the Dow Jones consensus estimate for 1.1%, according to a Bureau of Labor Statistics report Tuesday. Excluding food and energy, core PPI was up just 0.1% against the forecast for 0.5%. The services side of inflation — a key focus for Federal Reserve policymakers — was flat on the month.” Look, the PPI isn’t a tool that foretells consumer prices later, despite the wording here calling it a “pipeline” cost. It generally moves with the consumer price index (CPI), not before it. But this does echo what CPI showed the other day: Yes, the war pushed up fuel costs drastically. But broad prices showed little effect, which makes a ton of sense. Why? Without a huge money supply excess, rising prices in one category likely just redirect demand from other goods, a push and pull that doesn’t drive inflation.