Speaking about the Power Lunch program at CNBC, Jeffreys Chief Market Strategist David Zelvos said the potential power struggle at the Fed could have a positive impact on the stock market.
According to Zervos, a change in the Fed’s structure could lead to a president advocating lower interest rates, which could create a positive environment for the market.
Zervos noted that current Federal Reserve Chairman Jerome Powell’s term ends in the spring of 2025, with President Trump able to appoint at least two new members during this period. In this case, he pointed out that four members of the Fed’s seven board meeting were appointed by Trump. Zervos argued that the majority is more likely to support a more “growth” economic agenda.
Zervos, who said the new Fed chair could adopt lower interest rates, cited an example of Alan Greenspan’s low interest rate policy in the 1990s. “The risks Greenspan took at the time were ultimately proven right. The new chair may tend to take similar risks,” Zervos said, adding that the situation can support high-risk assets such as technology and growth stocks.
The program also noted that market interest in Jerome Powell’s rhetoric began to fade. Zervos said the fact that despite Powell signaling interest rate hikes in his latest press conference, the market has not responded significantly. “Now, the market is beginning to focus on who the next president will be and what he will do,” he said.
Zervos also notes his strategy of neutralizing numbers he doesn’t like during Trump’s tenure, suggesting that Powell is gradually on the sidelines like this. However, he said the market has not made any significant distinctions between new presidential candidates at this time, and that these names were now considered potential.
*This is not investment advice.