The impact Powell’s firing could have on stocks

The President has gone back and forth about whether he plans to keep Powell as Fed Chair.

Transcript

00:00If President Trump were to fire Fed Chair Powell because he's not doing what he wants him to do,

00:07what do you think the stock market fallout would look like if the independence of the Fed is in

00:11jeopardy? Yeah, I mean, that that is a problem. It is a sure, true problem. A lot of Americans

00:16have the misgut perception that the Federal Reserve is a federal division of the federal

00:20government. It is not. It is a private corporation, but it is private. It was charted by Congress. So

00:27it was a created entity by Congress. And but but and the president does appoint the head

00:34and then obviously all of the Fed presidents and all the Fed governors, all those things. So

00:39there is that sense of independence and autonomy. And should that for any reason,

00:44really, if he could somehow successfully fire Powell, I do think that that would be very disruptive

00:48for the markets, because then you can have on a whim, you know, it's a 10 year term for a reason

00:53that's supposed to outlast the president. And if you started to really jeopardize that independence,

00:57that would be a problem for the markets, because then you have the executive agency that, of course,

01:02every president wants the stock market to go up under there. But and we can make the stock market

01:05go up in a lot of nefarious ways, constantly printing stimulus, constantly keeping the cost of

01:10capital way below what it should be naturally organically. And so you have to have that independence

01:14and that needs to be maintained. What would that disruption look like? How much would the market fall?

01:18I think that you'd see a pullback in the markets, but then you would also, it would be depending on

01:25what was happening, right? Because if you were replacing Powell with someone who was more ready

01:29to stimulate and cut interest rates and do back good quantitative easing again, that would actually

01:34help capital markets, because then they would think, okay, we're going to have low cost of capital,

01:38we're going to be able to do research and development, we're going to be able to expand

01:40our infrastructure into AI and all of these things that were on the fourth industrial revolution cup.

01:44So it would actually possibly in this case might be helpful because Palestine is kind of being

01:50restrictive, whereas he's been accommodative, but now he's being restrictive. And so I think in this

01:54case, it might be helpful short term, but long term, the long term perspective of do we don't have

02:00independent central bank policy is problematic.