Stocks jump post-election, pre-Fed
"Risk appetite returned with gluttonous abandon on Wednesday," Kiplinger senior investing writer Dan Burrows says of how the stock market acted today.
The Dow jumped 1,500 points in reaction to a clear election result — remember, markets hate uncertainty. Some of the biggest wins of the day were seen in financials, with Goldman Sachs (GS) coming away as the Dow's best performer.
"Markets were so busy digesting the outcome of the election they were unable to mount the usual anxiety that precedes meetings of the Federal Open Market Committee (FOMC)," Burrows writes.
Read more here: Stock Market Today: Dow Jumps 1,500 points on Election Outcome
Could Trump impact the Fed meeting?
Despite appointing him to the Fed chair position in 2018, Donald Trump has not been Jerome Powell’s biggest cheerleader. During his first presidency, Trump regularly took to Twitter (before he got kicked off in the wake of the Jan. 6 attack and before his new pal Elon Musk took the platform over) to criticize Powell and the Fed, calling it “very weak,” as one tamer example. In fact, Trump tweeted about the Fed 100 times between nominating Powell and the beginning of 2020, according to a Yahoo Finance analysis.
By the end of 2018, Trump was already considering trying to fire Powell. Currently, no president has really tried to fire a Fed chair, and it’s an outstanding question if they have the legal authority to do so.
“The law says that the president can remove a member of the Federal Reserve's Board of Governors, which includes Jay Powell — quote — 'for cause.' And most legal scholars thinks that means the president can't do it just because he doesn't agree with the Fed chairman about policy,” Binyamin Appelbaum told PBS in 2018.
Earlier this year, Trump said he would not reappoint Powell, although in the summer, Trump said he would allow Powell to finish his term, which ends in May 2026.
Meanwhile, Powell has maintained the Fed is apolitical and driven only by what’s right for the American economy. And in any case, Trump won’t be sworn-in until January.
- Alexandra Svokos
Alexandra covered the 2016 election for Elite Daily, worked on midterm election coverage for Bustle and ABC News in 2018 and 2022, and helped manage election coverage for ABC News' website in 2020, including leading coverage on Jan. 6, 2021. While pursuing an MBA, she served as a grader for a course on Making of Economic Policy in the White House.
The Trump factor and the Fed meeting
While markets are generally expecting the Federal Reserve to reduce its benchmark interest rate by a quarter of a point, Fed Chair Jerome Powell has a new wrinkle to consider: President-elect Donald Trump, along with a Republican Senate and the possibility of a Republican-controlled House of Representatives, too.
Trump campaigned on extending and adding to his signature 2017 tax cut, and he has also talked about imposing steep tariffs on imported goods from China and Mexico. Plus, he says he will order deportations of illegal immigrants once he takes office. Whatever you think of those policies politically, they have the potential to drive up the federal budget deficit or raise costs for certain businesses and consumers, which could add to overall inflation.
Whether Powell suggests that those factors could slow the Fed's future intended interest rate cuts will be a key storyline to watch. Powell will demonstrate his commitment to hard data by cutting tomorrow and not reacting to vague fiscal policy plans. But expectations for the future path of rate cuts are definitely more uncertain now.
- Jim Patterson
Jim is the managing editor of The Kiplinger Letter and The Kiplinger Tax Letter. He joined The Kiplinger Letter in December 2010, covering energy and commodities markets, autos, environment and sports business, and previously covered federal grant funding and congressional appropriations for Thompson Publishing Group.