BarroMetrics Views: Janet Yellen
It was announced today that Janet Yellen has been picked by the White House to be Bernanke’s successor. World stock markets celebrated by rallying.
Given that her nomination had been expected since Summers withdrew, I can’t help but think that the rally is yet another sign of the belief that ‘Washington will get its act together’ before Oct 17. The idea now being mooted is to pass a ‘continuing resolution’ for 6 months. It’s argued that this will give ‘the parties time to resolve their differences’ – read ‘kick the can down the road’ (yet again).
This suggestion I think has some chance of success – only because it permits the US pollies to do what they do so well – ‘postpone’. In any event, I think it unlikely that we’ll see any progress till next week.
The question is then raised, after the ‘relief rally’ what then? I suggest we’ll see the stock markets focus on the QE and tapering. Given that Yellen is known to be even more dovish than Bernanke, we are unlikely to see, given the politics of the day, any tapering before next year. So, we should see the seasonal Xmas rally on the pre-condition that we’ll see the debt ceiling problem postponed and the earnings data come, now due, are are generally favourable.