Trump is expected to elect a new Fed chairman. What does this mean for markets?

On Thursday this week we expect Trump to elect the Fed Chairman definitively, with Jerome Powell as the leading contender for the place, with John Taylor at the time. The likelihood that Janet Yellen will keep his post has dropped sharply, and most market participants feel it is impossible for her to remain in office.

Experts believe that Powell's policy will not differ much from that of Yellen. It is expected that he will conduct a very similar monetary policy like that of Janet Yellen, and the main driver of the Fed's decisions will be the economic data the country is showing. Powell aims to gradually raise interest rates and gradually reduce the balance.

According to most Wall Street players, Powell is characterized as deregulating, and if he is elected, the US financial system will take a breath. What does this mean? Fewer bank regulations = more profit opportunities, so we expect growth in stocks in the banking sector.

And if Trump chooses John Taylor? Taylor stands out for his strong desire for changes in monetary policy, and most analysts believe he will not hesitate to raise interest rates sharply and cut the balance by the beginning of 2019. However, these changes will prove to be too dramatic for the economy and we will certainly see uncertainty in the market. Banks would positively reflect Taylor's appointment, but the worries it will create in other sectors will limit growth.

In both cases, we expect growth in the banking sector, with Powell's appointment being healthier for both banks and stock markets as a whole.

Source: Bloomberg Pro Terminal

Jr Trader Petar Milanov

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