It’s all about the expectation of interest rates. US President Donald Trump wants inflation to come down so that the federal funds rate (FFR) can fall to 1%, according to US media. He is likely to announce a new Federal Reserve (Fed) chair to replace Jerome Powell in May. The contenders are Kevin Hassett or Kevin Warsh, who was a Fed governor from 2006 to 2011. Christopher Waller, a current Fed governor, has been mentioned along with BlackRock’s Rick Rieder and Scott Bessent, Trump’s Treasury Secretary.
The Venezuelan Incident has sparked a global market rally. For equity markets, the focus is on crude oil’s link to inflation and interest rates. Interest rates, in turn, affect equity valuations and corporate profits in different ways.
Daleep Singh, Vice Chair and Chief Global Economist at Fixed Income, PGIM, says: “In the short-term, we view the situation as directionally positive for risk given the potential impact on oil prices, inflation and interest rates.”
