(Bloomberg) – Investors will likely have to avoid a fall in US stocks if President Joe Biden opts for a surprise election and replaces Jerome Powell as chairman of the Federal Reserve.
Nearly 90% of economists surveyed by Bloomberg expect Biden to keep Powell in the job, a staggering number that has been rising since June, while 9% view Fed Governor Lael Brainard, a Democrat, as a likely choice. Former Vice President Roger Ferguson was considered the third option by 2%. The survey applied to 52 economists was conducted from September 10 to 15.
Market nerves may follow a move that surprises investors. Upon re-nominating Powell, nearly two-thirds of economists predicted a short-term rally in stocks, while more than half predicted that stocks would fall in the short term if Brainard turns out to be the option.
Economists were evenly split on whether bond yields would rise or fall in response to news of either bond selection. About a third of economists refused to predict market reactions because there is too much uncertainty around how events would unfold.
Asked what kind of monetary policy potential candidates would adopt, they were both seen as dovish and in favor of keeping interest rates low to support full employment and strong growth. Some progressive groups have spoken of Brainard as more likely to take Wall Street and climate risks than Powell. However, Brainard would face a much more contentious fight for the Senate to confirm his nomination.
Nota Original:Stocks to Fall If Biden Drops Powell at Fed, Economists Say
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