President Trump or Markets: Which Did Powell Listen To?

President Trump

US equity markets are getting a boost today after dovish comments from Fed Chair Jerome Powell. According to MarketWatch, at the American Economics Association meeting in Atlanta, Powell said, “The U.S. central bank can now be patient about further monetary policy and wait to see how conflicting signals from the market and the economy resolve themselves.” He also said, “The central bank was open to changing course on rate hikes and reducing its balance sheet depending on how the economy evolves.”

President Trump or Markets: Which Did Powell Listen To?

Jerome Powell

Powell’s comments are music to investors’ ears. The cherry on top is Powell’s comments about the US economy. He commented, “Most of the hard data remain quite solid and suggest ongoing momentum going into 2019.” Strong growth and a dovish Fed are perhaps the best-case scenario for markets (SPY).

President Trump has criticized Powell multiple times. He has reportedly thought of firing Powell, a move denied by Treasury Secretary Steven Mnuchin. Meanwhile, according to CNBC, Powell said he would not resign even if Trump wanted him to. Markets were also uncomfortable with Powell’s stance, which was seen too hawkish.

Markets

US markets were, nevertheless, trading higher on China’s reserve cut and the upcoming US–China trade meeting. Powell’s comments have helped lift sentiment even further. In Why 2019 Could be a Crucial Year for Stock Markets, we noted that the Fed could be patient with rate hikes this year.

Let’s look at the markets. Amazon (AMZN) and Alphabet (GOOG) are, respectively, up 3.9% and 3.5% as of 11:00 AM ET. Apple (AAPL), which was Berkshire Hathaway’s (BRK-B) biggest holding at the end of the third quarter, has gained 3.6%.