Fed Frontrunner Hassett a 'Credible' Economist, Says Citi's Kaiser

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00:00Our Bloomberg News team broke a story about Kevin Hassett of the National Economic Council,

00:05White House Economic Council, becoming the key emerging person who could become the next Fed

00:12chair. We saw markets react. We saw yields on twos and tens move lower. We saw stocks go higher.

00:18What was your reaction to the possibility of a Fed chair Hassett?

00:21I think Hassett's been on sort of the short list with Kevin Walsh and maybe Rick Reeder and,

00:25you know, war maybe for a period of time now. So, you know, not too surprising that, you know,

00:30somewhat out of that core group is sort of being called the favorite. I'd probably tamp the brakes

00:34on exactly knowing what the outcome here is, because, you know, President Trump has tended to

00:38bounce around back and forth between the various candidates. But I think, look, I think Walsh,

00:42Hassett, Reeder are all considered, you know, very credible economists, you know, very,

00:46very deeply understand macro markets. Is Hassett credible?

00:49Yeah, I think I think Hassett is from an economics perspective on the credible side of things,

00:54without a doubt. And if that's the case, then, you know, you're it's not too big an issue,

00:59you know, depending on who they settle from from that group.

01:02But but would Kevin Hassett be a good and independent Fed chair? He is certainly seen

01:07as somebody who would bring President Trump's approach to interest rates and cutting specifically

01:12to the Fed, which President Trump has long wanted to control, at least according to those folks who

01:16we've been talking to in all of our reporting. And so maybe that is why he is coming out as the

01:22front runner runner. So I guess the question is, is would Kevin Hassett be independent? Would he

01:26lower or raise rates based on the Fed's mandate and not on the president's preference?

01:31I mean, you have to assume so. I mean, remember, Trump appointed

01:34appointed Powell, and now he doesn't consider Powell to be dovish enough. So, you know, I would say,

01:38you know, Supreme Court justices, Fed chairs. I mean, these people are generally pretty,

01:43pretty reputable people that respect the value and the independence of the organization. And you would

01:47hope he's going to make decisions based on on the incoming data. Clearly, a president is going to

01:51pick a chair that is consistent with their view. So, you know, it wouldn't surprise you that maybe

01:56Trump would settle on someone that skews a touch more dovish. But but the fact is that whoever the

02:01chair is, is walking into what's basically a split FOMC right now. That FOMC is also filled with 12

02:07other people who are very reputable economists who are not simply going to be kind of pushed around.

02:12And I think we're going to respect the data, respect the dual mandate as well. So it's not as if

02:16you're appointing someone that goes in and just, you know, makes the decision. Right. So again,

02:20I think all the three of the three or four of the core candidates, I think, are pretty well

02:24respected economists. They're entering an institution which you would assume they would,

02:28you know, respect and support. You know, every every chair is going to have a little bit of a

02:33hawkish or a dovish tilt or maybe a little more focus on inflation versus a little more focus on

02:38focus on the growth mandate. And that's fine. I don't think that that is that that's particularly

02:43offsides or inconsistent with history. So, yeah, I mean, I think any of those core would be fine.

02:47So let's talk markets. Yeah, let's talk markets. I mean, we just talked about with our Ian King

02:52about what's going on in terms of Alphabet versus NVIDIA, who wins, who not. I mean,

02:56Alphabet's been on tear this year, Stu. I mean, it's up about 70 percent year to date. You do see

03:02the markets remaining unsettled with core leaders under pressure. How do you define unsettled when

03:07it comes to markets? What are you looking at and what does this mean maybe over the next six months,

03:1112 months? Yeah, I think unsettled is kind of what we've seen really for the last month or so,

03:15which is for four kind of key things have changed in our view that have made the markets a little

03:20squishier. The first is that retail is pulled back considerably. And whether you believe or don't

03:25believe that retail is driving the market, certainly institutional investors are aware of that shift

03:29in supply demand. So, again, that's created a little bit uncertainty. AI, the reaction function

03:34of AI has clearly shifted, whether that is Meta or Palantir or Oracle or NVIDIA. And you can't ignore

03:40that. The third thing is retail. Retail earnings were soft and the commentary from management was

03:46very, very cautious. We just got a pretty weak retail sales number as well. So regardless of

03:52all the rest of it, people are saying, wait a second, this U.S. consumer has been the white

03:55knight of the economy and global economy probably for multiple years. And now it seems a little bit

04:00under pressure. And then last would be the Fed. Some uncertainty there. So not all of those

04:04uncertainties. It's a lot. Yeah. And in and of themselves, each one of these might not be an

04:10issue, but you put them all together and they've created some uncertainty. You're also in a tricky

04:13time of the calendar. You have portfolio managers who have portfolio managers, excuse me, who've had

04:18a really tough year. Yeah. If you're up here to date, you're not going to play hero ball between now

04:22and the end of the year as well. So I think you've made people a little more cautious for a lot of

04:26reasons. So I think right now it's hard to have a really, really strong tactical view. You know,

04:31if we had to pick one, we're going to pick higher into year end. We do think ultimately you get a

04:35rate cut and the seasonality pushes you there. But the risk reward around that is not nearly

04:39what it was a couple of months ago. What changes your view between now and the year end where

04:42you'd say, actually, we're not thinking higher till year end now? Yeah, the data, you know,

04:47probably December 16th would probably be the single most important date on the calendar,

04:50which is going to be, you know, dual dual payrolls reports. Our view is the unemployment rate is if you

04:56had to pick one thing is the single most important thing for for the market. So that's going to be a

05:00very important day. Before we get there, you know, Black Friday, Cyber Monday will be important.

05:05But the single biggest day is December 16th. And to remind everybody that comes six days after we

05:09hear from Fed Chair Jay Powell and the entire Federal Reserve, the FOMC, is going at this without the

05:15typical data that it has ahead of a Fed decision. Yeah, 100 percent. I mean, and you're also getting

05:19the inflation print on the 18th. So you can imagine a situation where the Fed cuts 25 basis points,

05:25tells you they're data dependent in 2026. And then, boom, you get hit with really weak labor markets

05:29the next week and vice versa. Somebody like I'm not I'm not saying, you know, either or is going to

05:34happen. But our view at this point is the logic behind the rate decision is as important as whether

05:39they cut or not. Right. If they don't cut and it's because the labor market looks solid and the

05:44beige book is very positive. That's good. If they do cut in the market site, wait, you all look like

05:49you might be behind the curve a little bit because the next week we get weak labor markets less good.

05:54So really, we are we are data dependent, probably a meeting before we expect it to be.

05:59But if you're asking what could change my view into year end to become more bearish, it should be we

06:03get some weak holiday spending data. And then that labor market report is unfriendly to the markets.

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