DoubleLine's Sherman: Trump is a debt guy, which is why he'd pick Jerome Powell

The GOP is associated with conservative economic policy, and so one might assume that a GOP president like Donald Trump would favor a more hawkish Federal Reserve that is aggressively moving to tighten monetary policy.

However, tight monetary policy appears to conflict with Trump’s goals. As such, it’s not surprising to hear reports that Trump favors someone like Fed governor Jerome Powell to be the next chair of the Fed Reserve, replacing Janet Yellen.

“I say, in general, give me a list of candidates and we’ll pick the most dovish,” DoubleLine Capital deputy CIO Jeff Sherman said to Yahoo Finance this week. “The dovish being the one who leans to easy interest rate policy. And right now, that’s Jerome Powell.”

Sherman echoes the argument advanced by his boss, Jeffrey Gundlach. At Vanity Fair’s New Establishment Summit earlier this month, Gundlach predcted the next Fed chair would be Neel Kashkari, the uber-dovish president of the Federal Reserve Bank of Minneapolis.

“I think I’m the only guy on God’s green earth that thinks it will be Neel Kashkari,” Gundlach said.

Jerome Powell (REUTERS/Kevin Lamarque)

While Kashkari is considered more dovish than Yellen or Powell, he was never seriously considered in the running for the Fed’s top seat.

Treasury Secretary Steven Mnuchin and Vice President Mike Pence have been leaning toward Powell or Stanford economist John Taylor for the position, Bloomberg News reported citing unnamed sources.

“We do not believe that President Trump wants a very strong or a tightening policy from the Fed because if you push interest rates up that makes the cost of debt go up for the U.S. government,” Sherman said. “And so, we strongly believe that President Trump is a debt guy — just given his history he likes debt. He’s from real estate. He likes to finance at lower rates. And why would you put someone in as the chair of the Fed who’s going to go against that type of policy?”

Listen to the full interview below:

—
Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.

• Trump can take credit for the stock market rally, but not for the reason he thinks

• Here’s the problem with using ‘CAPE’ to predict market crashes

• How rising Wall St. star Jeff Sherman uses CAPE to beat the market

• One way millennials are having a big impact on companies

• Blackstone’s Gray: 2 reasons why workplace gender diversity is important

• How technology has shifted the commercial real estate landscape

• Blackstone: Simple math makes us bullish on housing