The Republicans
Markets reversed earlier softness, moving higher over the week. Markets continue to focus on Donald Trump’s cabinet appointments. While the potential appointment of R J Kennedy as Health Secretary has caused a level of concern across some market segments and will test the support of moderate Republicans in the confirmation process, the proposed appointment of Wall Street veteran Scott Bessent (as Treasury Secretary) has been more widely supported. While Trump has continually pushed the envelope regarding political appointments, he has sought to allay Wall Street fears as it relates to ‘investment market’ appointees.
The Fed Chair
The appointment of Bessent who broadly supports Trump’s tariff policies alongside the rollout of his ‘3-3-3’ policy, which aims for 3% Gross Domestic Product growth, reducing the deficit to 3% and increasing oil production to 3mn b/pd (3 million barrels per day, may also seek to become a ‘shadow’ Fed Chair. This has significantly wider implications for markets. While a ‘shadow’ role may be more form over substance, it does create an interesting dynamic for the Fed over the last 15 months of Powell’s tenure as Fed Chair, particularly if Trump looks to appoint a new Fed Chair (in waiting) well before the end of Powell’s term. Markets could begin to recalibrate to the policy framework of the new appointee, stymieing the influence of the existing Fed Board and Chair. The move around potential Fed Chair appointees is going to be a major influence on markets throughout 2025.
Rate Cuts
On the data front, it was a relatively quiet week. US housing data was broadly in line with estimates, while the release of the RBA (Reserve Bank of Australia) minutes continues to point to the RBA pushing any rate cuts well into the 1q25 (or beyond). While a local Dec rate cut looks all but unlikely, there remains the potential for the US Fed to cut one final time (-0.25%) in 2024. This would take the US Fed Funds Rate to 4.5%. In the US this week the focus will be on the release of PCE (Personal Consumption Expenditures) data (forecasted 2.8% y/y) along with durable goods orders and consumer confidence data (forecasted 111.8, +3.1% pcp). Europe has the release of its Nov (P) CPI (Consumer Price Index) data (forecasted 2.8% y/y), while Chinese Purchase Managers Index surveys will be closely watched for signs of ongoing stability across the economy. On the domestic front, it is relatively quiet, with the release of (Oct) monthly CPI (forecasted 2.3% y/y, +0.2%) to be the major focus.
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