Many may think the Sunday night rally in S&P Futures and follow through today is a ringing endorsement of Larry Summers removing his name from contention to be next Chairman of the Federal Reserve. Before the tweets last night about Summers letting the president know he was no longer interested in the job became intermixed with those of NFL fans discussing the game they were watching there was a lot of debate over who should be the next chair of the Fed. There were two consistent pieces to the debate. First it was uncertain if Summers, who appeared to be the front runner, could get the required votes in the Senate to be approved. the second questions was who would be the better choice, Summers or Janet Yellen. Summers appeared to be the person the President wanted, while Yellen was the person that would be the safer choice and potentially easier to get nominated.
There were questions around whether Larry Summers could get approved in the Senate. Recently Summers name was being floated as the likely nominee. As Summers appeared to be the front runner there were objections from Democrats and Republicans alike. It because pretty apparent his confirmation was going to be a tough fight for votes. His getting approved was anything but certain. This was probably one of the major factors that caused him to remove his name from consideration.
The second debate was who would be the better choice for the President as Ben Bernake’s replacement. Yellen has been going to those high profile Fed meetings for almost a decade. Based on experience she was the better of the two choices and considered a safer choice for the markets. Agree or disagree with her, at least there is certainty around what you get if she takes over and there was a feeling she would be an easier candidate to get through the confirmation process.
When I write first drafts of blogs I have a habit of overusing some words. Note that I have used the words certain or uncertain in each of the previous three paragraphs. That is because the reason the markets are up is based around certainty, not necessarily who the nominee is going to be. This has been a two person race for the job and one of the people just dropped out. The markets believe we now know who will get the nomination and get to testify before Congress live on all the business networks. The markets love certainty and that’s what we got last night. At least until the rumors that Stanley Fischer is being considered start popping up.