A few short weeks ago, Federal Reserve Chairman Powell seemed to be a shoo-in for renomination to his current role as Chairman. However, the rumor mill is in full swing in Washington with grumblings that current Federal Reserve Governor Lael Brainard may in fact be in line to take Chairman Powell’s place. This could present a significant change in strategy with governor Brainard being much more dovish in her commentary. The potential for more gradual increases in interest rates could be on the horizon as the Fed begins to slow down its bond purchases into 2022. There has also been speculation made that Brainard has a more “political” bent. She is on record as giving to the Hilary Clinton presidential campaign and, therefore, the upcoming mid-term elections could be a factor in the decision that President Biden chooses to make. This is all highly speculative talk at this point, but if Brainard were to be nominated, we could see some additional near-term upward movement from our financial markets. Also keep in mind that Chairman Powell was a President Trump pick and that could have some bearing on the eventual outcome. What seemed like a non-event weeks ago has certainly gained traction quickly. Whatever the outcome, I would expect the markets to react then normalize in a rather short period of time.
House Democrats passed the Build Back Better Act on Friday, which moves the newest spending plan one step closer to reality. This is the last big piece of legislation on the agenda for the current administration, but the “battle” is far from over. Like the recent infrastructure spending bill that passed, this $1.75 trillion plan will certainly look different once the Senate Republicans add their two cents. Social safety nets, closing tax loopholes for the wealthy, and climate change are significant pieces of this latest proposal. While the overall spending theme continues in Washington, it is looking more and more promising that at least some level of agreement between the two parties is occurring. Again, with mid-term elections now looming, the window to strike a deal is getting smaller as lines in the sand will become walls as election platforms gain momentum. Barring anything major, 2021 is looking to close out on a strong and upbeat note.
As is always the case, we here at Mosaic are thankful for our many clients and friends. I won’t be writing a letter next week as I will be spending the latter half of the week with family. Although if something does come up, I won’t be able to help myself! I hope you are able enjoy a more “normal” Thanksgiving this year with those near and dear. I will be in my happy place – the kitchen!
Have a wonderful weekend.