Wall Street wants Janet Yellen.
The markets are loudly celebrating Larry Summers’ withdrawal for the Fed chief’s role. As it desperately hopes that the Fed will continue its easy money policy, Wall Street was concerned that the hawkish Summers would tear apart the delicately balanced, post-crisis economic stimulus. The Dow Jones Industrial Average rose more than a hundred points yesterday to end at 15,494.78, up 0.77% or nearly 119 points. Ironically, this discomfiting exit maybe the most influence Summers will personally ever have on the equity markets. It seems that the markets are seeing his exit as an indication that quantitative easing will not taper off and that the Fed will remain a dove – at least for a little while longer.
So, what’s next? One can hope that the White House will get over its strong infatuation with Summers and at last grasp the quite-obvious-to-the-rest-of-the-world rationale of requesting Janet Yellen to lead the Fed. Why is there even a debate to make the most qualified Federal Reserve chair who headed the San Francisco Federal Reserve from 2004 to 2010 and has been Vice Chair of the Fed from 2010 onwards, the head of this body? She is the favorite of the academic world, of the organized labor movement, and in the Congressional corridors of power in Washington. She’s the definite favorite of the markets. Additionally, Yellen is a known dove, who has been at the forefront of the Fed’s concerns about unemployment and growth rather than the hawkish obsession with inflation. This is the philosophy that led to quantitative easing under Helicopter Ben.
Following the Dow’s lead, the broader market index, S&P 500, was also up. The Index gained 0.57% to end at 1697.60. This has again brought the S&P 500 within 1% of its all-time highs of 1709.67.
Oh yes, Wall Street definitely wants Janet Yellen.