THE FED, YELLEN, AND TRUMP

Donald Trump has been quite critical of Janet Yellen. At the first  presidential debate, he criticized Yellen for keeping interest rates low for political reasons, and that the Fed will create a problem the stock market when you start raising interest rates. Yellen’s term expires in 2018, but there is rampant speculation that she may resign in the next few months, due to the election of Trump.

It is axiomatic that lower interest rates are good for the equity market and higher interest rates lead people to invest in debt. Therefore, the continuation of low interest rates would likely beneficial for equity IPOs, and an increase in rates would be detrimental.

One must only look at comes background to Anderson where his instinct would lie. As a real estate investor, he would favor low interest rates. On the other hand, if as a result of his tax and regulatory policies, the is an economy in which an IPO is easier to plan for, because of the length of time required for the IPO process starts going quickly, it would make it easier for the Fed to raise rates.

David Malpass, who is leading Mr. Trump’s economic transition team, said in November 2 017:” there should be focus on growth oriented structural reforms including reforms of taxes, trade, regulatory policy and energy policy.” This indicates a shift from the emphasis on monetary policy to fiscal policy, so that the Fed would be seen as having a lower impact on going public.

In the recent past, the emphasis on monetary policy has been detrimental, since the financial community has always been looking to the Fed to decide whether rates are going to change. This has lead to instability. The IPO process takes at least 6 to 9 months. Investment bankers like stability. Greater stability results in more optimism with respect to planned IPOs.