On a recent webcast, I heard a speaker made a distinction that is worth keeping in mind. When looking at the financial universe you should distinguish between what is interesting vs. what is important.
An example: President Biden must soon decide whether he’s going to renominate Jay Powell as Fed Chairman for another term. It’s interesting to see who is going to be the next Fed Chair. But is it important? Right now, probably not. Powell has been on the Fed Board of Governors for almost 10 years. He’s an insider, unlikely to do anything extraordinary. And his replacement, whoever it might be, will be similar. Biden is not an extremist. He would not nominate someone to run the Fed who is not qualified, or who has an extreme point of view about economics. So this is interesting, but not super important.
Contrast that to what the Fed does about interest rates. If they significantly move interest rates higher over the next few years, it will affect every area of the economy. Car loans, mortgage loans, bank rates, corporate cost of capital all would move higher. This is important stuff.
Who runs the Fed (within reason) is interesting. But what they do is important. Keep that in mind when you’re looking at the financial news. Interesting or Important?