Potential Impact of Kevin Hassett's Fed Chair Nomination on U.S. Stocks and Monetary Policy

Based on the context that 69% of investors in Bank of America’s December Global Fund Manager Survey expect Trump to nominate Kevin Hassett as the next Federal Reserve Chair, I need to analyze the deep impact of this potential personnel change on U.S. stock valuations and monetary policy.

Kevin Hassett currently serves as the Director of the U.S. National Economic Council and is seen as a top candidate for the Fed Chair position. Predictive market data shows his winning probability exceeds 85% [1]. His economic views and policy tendencies have the following characteristics:

• Strong Preference for Interest Rate Cuts
  : Hassett publicly stated that “there is more room for rate cuts” and believes that the risk of overly tight monetary policy is greater than the risk of rising inflation [1]
• Market Optimist
  : He believes that businesses and consumers are highly sensitive to price signals such as taxes, advocating for guiding the economy through price mechanisms rather than administrative intervention [1]
• Strong Political Relevance
  : As a loyal supporter of Trump, the market has concerns about whether he can maintain the Fed’s independence [2]

Based on the latest market data [0], U.S. stocks showed divergence as expectations for Hassett’s nomination increased:

• Dow Jones Industrial Average
  : Rose 2.05% during the period, showing the strongest performance
• S&P 500 Index
  : Slightly increased by 0.17%, basically flat
• Nasdaq Composite Index
  : Fell by 1.48%, with tech stocks under pressure

This divergence reflects the market’s complex expectations of the potential monetary policy shift brought by Hassett.

According to the latest sector performance data [3]:

• Beneficiary Sectors
  : Utilities (+2.11%), Basic Materials (+1.10%), Cyclical Consumption (+0.96%)
• Pressured Sectors
  : Energy (-0.88%), Healthcare (-0.31%), Real Estate (-0.24%)

• Rate cut expectations will enhance the relative attractiveness of growth stocks, especially interest rate-sensitive industries
• Traditional value stocks and financial stocks may benefit from changes in the yield curve
• High-yield assets such as Real Estate Investment Trusts (REITs) are expected to undergo valuation revaluation

Hassett clearly stated that the impact of the government shutdown means the Fed should cut rates in December and expects the shutdown to reduce Q4 GDP by 1.5 percentage points [1]. This view shows he is more sensitive to downside economic risks.

Market analysts have major differences on whether Hassett can maintain Fed independence [2]:

• Support Views
  : Believe his academic background is sufficient to support professional decisions
• Opposing Views
  : Worried he may cut rates indiscriminately to please Trump

Financial Times reports that several large asset management companies have expressed concerns to the U.S. Treasury, fearing Hassett will forcefully lower short-term rates [1]. This policy combination may trigger:

• Long-term Treasury sell-off
• Yield curve steepening
• Risk of U.S. mortgage rates rising instead

Market analysis compares Hassett’s potential policy mistakes to the crisis caused by former UK Prime Minister Truss [1]. If inflation remains above target while cutting rates forcefully, it may lead to:

• Surge in long-end yields
• Unanchoring of inflation expectations
• Damage to the dollar’s reserve currency status

Analysts compare Trump’s influence pattern on the Fed to Erdogan’s approach in Turkey [2]:

• Systematically replacing central bank leadership
• Policy independence damaged by political pressure
• Long-term inflation expectations out of control

1. Increase interest rate-sensitive assets
   : Utilities, high-dividend sectors like REITs
2. Focus on financial stock opportunities
   : Benefit from yield curve changes
3. Moderately reduce growth stock exposure
   : Wait for policy clarity

1. Inflation-protected assets
   : TIPS and other anti-inflation tools
2. Diversified allocation
   : Reduce reliance on the U.S. single market
3. Focus on exchange rate fluctuations
   : The dollar may come under pressure due to policy uncertainty

The potential appointment of Kevin Hassett as Fed Chair is currently the most important policy uncertainty factor for the U.S. stock market. Although his rate-cutting tendency may benefit stock valuations in the short term, concerns about independence and potential policy mistake risks cannot be ignored. Investors need to carefully balance short-term opportunities and long-term risks, closely monitoring:

• Market reaction after Hassett’s formal nomination
• Changes in the composition of other Fed Board members
• Actual inflation data trends and policy alignment

This personnel change will profoundly affect U.S. monetary policy direction and stock valuation levels from 2026 onwards; investors are advised to maintain a cautiously optimistic attitude and prepare for multiple scenarios.

[0] Jinling API Data - U.S. Stock Index and Sector Performance Data
[1] Yicai - “Which Hassett Might Take Charge of the Fed” (https://www.yicai.com/news/102953279.html)
[2] BBC Chinese - “Fed Announces Third Rate Cut This Year; Voting Details Show Internal Divisions” (https://www.bbc.com/zhongwen/articles/cm20er09v5eo/trad)
[3] Jinling API Data - Sector Performance Data