How Many Candidates Does It Take to Change a Fed Chair? (11 So Far)
Let's look at some of the names tossed around as potential nominees for Jerome Powell's seat, how Treasury Sec. Scott Bessent and I think alike, and news of a possible delay in drug tariffs.
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Incredibly, on Wednesday, CNBC and others reported that a whopping 11 candidates were supposedly under consideration for nomination to replace Fed Chair Jerome Powell in May when his term (as Fed Chair, not as Governor) expires. Two "anonymous" administration officials are said to have confirmed the new names.
Forgive me if I have some doubts that all of these 11 names are really under consideration. Maybe some names have been thrown around casually. Maybe some have been mentioned speculatively. Who knows? We all knew that current Fed Governors Michelle Bowman and Christopher Waller were under serious consideration as well as former Fed Gov. Kevin Warsh and Kevin Hassett who is the current director of the National Economic Council of the U.S. All of those names pass the smell test and I think that there is indeed some "there" there.
Now, this week, we heard that current Fed Chair Philip Jefferson, Dallas Fed Pres. Lorie Logan and former St. Louis Fed Pres James Bullard were candidates. Now former Bush economic adviser Marc Sumerlin, former Fed Gov Larry Lindsey, Jeffries Chief Market Strategist David Zervos and BlackRock CIO for global fixed income Rick Rieder are said to be among the 11.
The two "anonymous" Trump administration officials have said that Treasury Sec. Scott Bessent will interview all of the candidates and then pass on his "final" list to the president. I will tell readers this. I do have first-hand experience with more than one of these candidates in a working capacity. There is at least one name here that I would be pleased to see serve at the head of our central bank. There is also at least one name here that I would not hire to wipe tables at a fast food joint.
"That's all I have to say about that."
- Fictional movie character Forrest Gump
Whole Lotta Basis Points
You knew that Treasury Sec. Scott Bessent had mentioned that he would like to see the Fed kickoff the move toward lower short-term interest rates with a half percentage-point cut in September. If you read this column, then you know that I have regularly written that in my opinion, and according to my model, the target range for the Fed Funds Rate is at least a percentage point too high and that this is dragging on and will drag on both credit creation and economic activity.
It appears that Treasury Sec. Scott Bessent and I think more alike than I knew. On Wednesday morning, while appearing on the "Bloomberg Surveillance" show at Bloomberg TV, Bessent again made his call for next month: “I think we could go into a series of rate cuts here, starting with a 50 basis-point rate cut in September.”
Then Bessent got down to business, adding: “If you look at any model” the implication is that “we should probably be 150, 175 basis points lower.” I would personally like to boast that "great minds think alike" as I feel that Bessent is truly brilliant, but I also feel that this monetary reality is by now probably clear to almost anyone who pays attention. With the exception of current FOMC leadership.
In Other News...
Reuters is reporting that sources both in Europe and the U.S. have told the news agency that Pres. Trump is not likely to imminently impose new tariffs on pharmaceutical imports. The president has threatened tariffs of as much as 250% on foreign made drugs, but sources are telling the media that findings of a national security probe into semiconductors and this Friday's meeting with Russian Pres. Vladimir Putin are immediate priorities. The results from a different investigation into the national security implications of a continued reliance on foreign-made pharma is apparently not in as of yet. Any subsequent increase in drug-related tariffs is currently thought to be weeks away.
Ahead of Alaska
The Wall Street Journal is reporting that president Trump held a video-conference on Wednesday with European leaders ahead of tomorrow's summit in Alaska with Putin. The president has apparently told his European counterparts that he would not negotiate territorial issues with the Russian leader, adding that Ukraine must have that discussion directly with Russia and that he would like to follow this meeting with a trilateral summit that would include Ukrainian Pres. Volodymyr Zelenskyy.
Pres. Trump has made it clear that he is after a ceasefire at this meeting and that a Russian refusal would result in "very severe consequences." The president has also made it clear that any security guarantees offered to the Ukrainian side as part of a peace deal would not involve NATO, but would likely involve the U.S. and European nations. Both France and Germany would likely be expected to participate in such an agreement.
Wednesday
Yes, there was some rotation on Wednesday. The small caps and the transports roared for a second straight session. Capital really didn't come out of any other area, though. Investors just stopped accumulating those groups. Wednesday's purchases very likely came from to some degree, cash balances.
The S&P SmallCap 600 gained 2.12% on Wednesday as the Russell 2000 gained 1.98% and the Dow Transports gained 1.41%. This time, the truckers did well, replacing the airlines at the top of that group. The S&P 600 and Russell 2000 are now both positive for 2025 for the first time in six months.
The major equity indexes? Meh. The S&P 500 still gained 0.32% and the Nasdaq Composite tacked on 0.14%. While performance seemed pedestrian by recent standards, both of our major equity indexes set new record highs yet again on Wednesday. Both the S&P 500 and Nasdaq Composite made a higher high for an eight consecutive trading day.
Breadth
Ten of the 11 S&P sector SPDR ETFs closed out the Wednesday session in the green, led by the Materials XLB and Health Care XLV. The Materials were boosted by the weaker U.S. dollar as stocks like Cleveland-Cliffs, Albemarle ALB and Nucor NUE ran wild. One sector, the Staples XLP closed unchanged. This is the first two day stretch that I can remember (at least for a while) that not a single one of these funds closed in the red on either day.
Winners beat losers by a rough 4 to 1 at the NYSE and by about 5 to 2 at the Nasdaq. Advancing volume took a 75% share of NYSE-listed trade for the day and a 73.1% share of Nasdaq-listed activity. The best part? Aggregate trading volume was up 1.2% across NYSE-listed securities and up 4.6% across Nasdaq-listings. Volume was higher across the S&P 500 again too.
I would not call this a "Day One" as there is no reversal of trend involved. I could not call this a "Day of Confirmation" as there was not a convincing enough move at the major index level and volume was not up sharply enough. That said, I think it is clear that professional money is telling us that the trend remains in place and that trend remains bullish. The rally may be broadening. That, my friends, is the evolution of a bull market. It is certainly not a negative.
Economics
(All Times Eastern)
08:30 - Initial Jobless Claims (Weekly): Expecting 223K, Last 226K.
08:30 - Continuing Claims (Weekly): Last 1.974M.
08:30 - PPI (Jul): Expecting 0.2% m/m, Last 0.0% m/m.
08:30 - Core PPI (Jul): Expecting 0.2% m/m, Last 0.0% m/m.
08:30 - PPI (Jul): Expecting 2.4% y/y, Last 2.3% y/y.
08:30 - Core PPI (Jul): Expecting 2.7% y/y, Last 2.6% y/y.
10:30 - Natural Gas Inventories (Weekly): Last +7B cf.
The Fed
(All Times Eastern)
2:00 p.m. - Speaker: Richmond Fed Pres. Tom Barkin.
Today's Earnings Highlights
(Consensus EPS Expectations)
Before the Open: AAP (.59), BIRK (.60), DE (4.55), TPR (1.01)
After the Close: AMAT (2.36)
At the time of publication, Guilfoyle had no position in any security mentioned.
