Halister News

(Bloomberg) -- If the WSJ report that U.S. President Trump won’t be nominating White House economic advisor Gary Cohn to succeed Janet Yellen is true, the market may reprice the risks around the Fed succession in a less dovish and more hawkish direction, writes Krishna Guha Vice Chairman at Evercore ISI in note.

• Cohn is perceived by investors as a market-friend candidate with dovish lean on interest rates
• Sees chances of Cohn’s appointment at 15%
  • Doesn’t think the chances will fall to zero as Cohn might still win back Trump’s favor especially if he achieves a breakthrough on tax reform
• To the extent that he is now less likely to succeed Yellen, the risk skew around the reappointment does shift a bit less dovish, more hawkish direction
• Most of the names cited in the WSJ report — Lindsey, Warsh, Taylor — have a relatively traditional Republican / hawkish flavor
• In the final analysis Trump will end up picking someone who is not a hawk, reflecting his own preferences for low rates and a weak dollar
  • Hubbard, Powell, Kaplan and Dudley among others warrant ongoing attention in this regard
• NOTE: Wall Street Journal tweeted Trump is unlikely to nominate Gary Cohn to become Federal Reserve Chair

To contact the reporter on this story: Michael G. Wilson in Sydney at mwilson176@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Patricia Lui