Chat with us, powered by LiveChat Opinion: If Trump wants to spring a Fed surprise, he’s set market up nicely for a Yellen bump | The Mortgage Advisory

Jerome Powell would be a logical choice for President Donald Trump if he wants from the next Fed chairman a continued low-interest-rate path and no impediments to a deregulatory agenda.

The leaks so far — and Trump’s own commentary — all suggest that Powell will be nominated to replace Janet Yellen as chair of the Federal Reserve. A new report Friday from Bloomberg News certainly pointed readers in that direction.

But we do know that Trump likes to bask in glory, and one way he measures glory is through the stock market.

And now that the market has priced in the likelihood of a Powell-led Fed, there’s only one way a Trump choice would make the stock market go bananas — and that is if he picked Yellen.

Yellen would not be by any means a crazy choice, even if it would annoy Republicans on Capitol Hill to see a former Berkeley professor win a second term. She’s done admirably in her term, gently lifting interest rates, setting the market up for a balance-sheet reduction, all the while providing conditions for continued job growth and not sparking inflation.

One could say that the stock market and housing market, neither of which is factored into inflation calculations, suggest Yellen has provided too much juice to the economy. But that’s not a criticism that Trump, as president, is likely to hold against her, even if it did rile Candidate Trump.

That’s not to say the market would be derailed by Powell. In fact, given the market has to assign at least some possibility that the remaining hawk in the race, John Taylor, could get the job, there probably would be a bounce of some sort if Powell were Trump’s pick.

But it wouldn’t be the fireworks that would be in store if Trump chose Yellen. And, if for that reason alone, maybe it’s too soon to proclaim that the Fed-chief race is over, no matter what the insiders are saying.