Powell now more likely to stay at Fed past time as chair, says Strategas' Dan Clifton

Summary

Dan Clifton, Head of Policy Research at Strategas, discusses the DOJ probe into the Federal Reserve and its implications for Fed leadership and financial deregulation. He argues the probe is an unforced error that delays the next Fed chair confirmation and raises the likelihood Powell remains a Fed governor, creating a shadow Fed. Clifton says the political hurdle calls into question the deregulation agenda that had supported bank stocks and adds uncertainty for investors, though he expects the issue may eventually pass. He also notes the odds of Kevin Warsh, Waller, or Rieder as Fed chair may rise while Hassett becomes less likely.

• Dan Clifton says the DOJ probe of Powell is an unforced error with greater downside than upside.
• The probe delays confirmation of the next Fed chair and may alter the nominee.
• Clifton sees a higher likelihood Powell stays as a regular Fed governor, creating a shadow Fed.
• The financial deregulation agenda and bank stocks face near-term uncertainty.
• Fed chair odds shift away from Kevin Hassett toward Kevin Warsh, Waller, or Rieder.
• Clifton expects the issue may eventually pass but says it is a hurdle for the president's agenda.
• Midterm election politics and policy distractions add uncertainty for investors.