The US president Donald Trump has officially nominated Jerome Powell, to be the next chairman of the Federal Reserve, replacing Janet Yellen when her term expires on February 1, 2018.
Jerome Powell is a lawyer rather than an academically trained economist and would be the first chairman without an economic doctorate since Paul Volcker served from 1979 to 1987. The majority of his other experience has been in investment banking and private equity. He joined Fed board of governors in 2012 and therefore was involved in the decision-making behind QE3 and policy normalisation in recent years.
Mr Powell may not have the depth of economic expertise expected by the market but that is unlikely to matter for now, while the waters are relatively calm and the course of Fed’s policy is well-set. Will he emerge as a capable and strong leader when the cycle turns and the Federal Open Market Committee (FOMC) has to change course is still some way off. His senate nomination hearing in the coming months will provide the first insight into what type of Fed chairman he will be. Regardless of his performance at the hearing, however, his nomination is expected to be confirmed without too much drama.
So what can change on monetary policy?
We have no expectations that the change of Fed chairmanship in February next year will trigger any change in the monetary policy regime and expect that the UST (United States Treasury) curve will remain hinged against the improving economic growth in the US.
From the market perspective, Mr Powell’s nomination represents continuity, given his reputation as a centrist on the monetary policy spectrum, aligning his views with that of the consensus. In fact, in past speeches he has often referenced how the committee thinks rather than what he thinks. We expect a Powell-led Fed to stick with the current narrative of structurally lower growth and interest rates. However, a lot still depends on who Mr Trump picks to fill the other vacancies on the Fed’s board. With Mr Powell’s promotion, there will be four vacancies, including for the vice chairman position.
Beside an unchanged path of rate hikes in the immediate term, it will be interesting to see if a Powell-led Fed changes its view on long-term rates and therefore the terminal rate in this hiking cycle. The Fed, in its September meeting, marked down estimates to 2.75 per cent for long-run interest rates. In contrast, markets have been convinced for some time that the terminal rate in this cycle will be considerably below prior hiking cycles and will probably peak at only 2 per cent.
The Fed’s recent downward revision to long-term rates was accompanied by estimate of GDP growth declining to 1.8 per cent. However, if tax reform passes, the effect of transitory factors recede and progress is made on financial deregulation, then a pick-up in inflation expectations and higher structural rates could become a possibility. That said, these changes are more likely to be driven by uptick in economic data than on any material shift in the personalities at the FOMC.
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The seemingly endless flattening in the UST curve has continued post the Powell nomination. 10-year UST yields are at only 2.32 per cent. Expectations of a reduction in growth and economic activity in the medium term, together with a global demand for yield has kept a lid on the 10-year UST yields despite the projected Fed rate hike cycle. The 2yr/10yr spread at 0.67 per cent is at nearly a decade low as the hiking cycle has bumped up the front end more so than the increase in 10yr yields resulting in this bear flattening. Weaker realised inflation from structural and idiosyncratic factors and now the continued tightening policy of the Fed is likely to keep inflation expectations low regardless of the change in leadershi[p.
What can change on balance sheet normalisation?
We expect the Powell-led Fed to proceed with the current balance sheet normalisation schedule. The latest FOMC meeting minutes showed no change in language around the balance sheet unwind that was announced at the September meeting and began in October. The FOMC wants to keep the balance sheet run-off on autopilot and markets have taken the start of the process in stride. There appears no need to deviate from this schedule in any way and the Mr Powell will need overwhelming urgency to justify any change, which isn't the current base case.
What can change on regulation?
While Mr Powell is unlikely to change the path of Fed’s policy in the short term, he will probably put significant priority on scaling back financial market regulation. In recent speeches, he has stated: “There is certainly a role for regulation, but regulation should always take into account the impact that it has on markets, a balance that must be constantly weighed. More regulation is not the best answer to every problem.”
We think he will work towards easing some of the burdensome regulations albeit with the goal of retaining the core post-crisis policies. He had recently highlighted the main points for possible regulatory reforms as follows: simplification of regulation of small and medium-sized banks; reassessing the Volcker Rule with possibility of eliminating or relaxing aspects of the rule; comprehensive capital analysis and review - enhance transparency around how this is assessed; supplementary leverage ratio - examine the relative calibrations of the leverage ratio and the risk-based capital requirements.
Mr Powell is likely to make these adjustments soon after the appropriate due diligence has been conducted.
Anita Yadav is the head of fixed income research, senior director – wholesale banking, Emirates NBD Bank
COMPANY PROFILE
Company name: Klipit
Started: 2022
Founders: Venkat Reddy, Mohammed Al Bulooki, Bilal Merchant, Asif Ahmed, Ovais Merchant
Based: Dubai, UAE
Industry: Digital receipts, finance, blockchain
Funding: $4 million
Investors: Privately/self-funded
The biog
Age: 59
From: Giza Governorate, Egypt
Family: A daughter, two sons and wife
Favourite tree: Ghaf
Runner up favourite tree: Frankincense
Favourite place on Sir Bani Yas Island: “I love all of Sir Bani Yas. Every spot of Sir Bani Yas, I love it.”
COMPANY PROFILE
Name: Haltia.ai
Started: 2023
Co-founders: Arto Bendiken and Talal Thabet
Based: Dubai, UAE
Industry: AI
Number of employees: 41
Funding: About $1.7 million
Investors: Self, family and friends
COMPANY PROFILE
Name: DarDoc
Based: Abu Dhabi
Founders: Samer Masri, Keswin Suresh
Sector: HealthTech
Total funding: $800,000
Investors: Flat6Labs, angel investors + Incubated by Hub71, Abu Dhabi's Department of Health
Number of employees: 10
What are the GCSE grade equivalents?
- Grade 9 = above an A*
- Grade 8 = between grades A* and A
- Grade 7 = grade A
- Grade 6 = just above a grade B
- Grade 5 = between grades B and C
- Grade 4 = grade C
- Grade 3 = between grades D and E
- Grade 2 = between grades E and F
- Grade 1 = between grades F and G
COMPANY PROFILE
Company name: Revibe
Started: 2022
Founders: Hamza Iraqui and Abdessamad Ben Zakour
Based: UAE
Industry: Refurbished electronics
Funds raised so far: $10m
Investors: Flat6Labs, Resonance and various others
MEDIEVIL (1998)
Developer: SCE Studio Cambridge
Publisher: Sony Computer Entertainment
Console: PlayStation, PlayStation 4 and 5
Rating: 3.5/5
Alan Wake Remastered
Developer: Remedy Entertainment
Publisher: Microsoft Game Studios
Consoles: PlayStation 4 & 5, Xbox: 360 & One & Series X/S and Nintendo Switch
Rating: 4/5
if you go
The flights Fly Dubai, Air Arabia, Emirates, Etihad, and Royal Jordanian all offer direct, three-and-a-half-hour flights from the UAE to the Jordanian capital Amman. Alternatively, from June Fly Dubai will offer a new direct service from Dubai to Aqaba in the south of the country. See the airlines’ respective sites for varying prices or search on reliable price-comparison site Skyscanner.
The trip
Jamie Lafferty was a guest of the Jordan Tourist Board. For more information on adventure tourism in Jordan see Visit Jordan. A number of new and established tour companies offer the chance to go caving, rock-climbing, canyoning, and mountaineering in Jordan. Prices vary depending on how many activities you want to do and how many days you plan to stay in the country. Among the leaders are Terhaal, who offer a two-day canyoning trip from Dh845 per person. If you really want to push your limits, contact the Stronger Team. For a more trek-focused trip, KE Adventure offers an eight-day trip from Dh5,300 per person.
COMPANY PROFILE
Company: Eco Way
Started: December 2023
Founder: Ivan Kroshnyi
Based: Dubai, UAE
Industry: Electric vehicles
Investors: Bootstrapped with undisclosed funding. Looking to raise funds from outside
Auron Mein Kahan Dum Tha
Starring: Ajay Devgn, Tabu, Shantanu Maheshwari, Jimmy Shergill, Saiee Manjrekar
Director: Neeraj Pandey
Rating: 2.5/5
'Doctor Strange in the Multiverse Of Madness'
Director: Sam Raimi
Cast: Benedict Cumberbatch, Elizabeth Olsen, Chiwetel Ejiofor, Benedict Wong, Xochitl Gomez, Michael Stuhlbarg and Rachel McAdams
Rating: 3/5
THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
Blackpink World Tour [Born Pink] In Cinemas
Starring: Rose, Jisoo, Jennie, Lisa
Directors: Min Geun, Oh Yoon-Dong
Rating: 3/5
The struggle is on for active managers
David Einhorn closed out 2018 with his biggest annual loss ever for the 22-year-old Greenlight Capital.
The firm’s main hedge fund fell 9 per cent in December, extending this year’s decline to 34 percent, according to an investor update viewed by Bloomberg.
Greenlight posted some of the industry’s best returns in its early years, but has stumbled since losing more than 20 per cent in 2015.
Other value-investing managers have also struggled, as a decade of historically low interest rates and the rise of passive investing and quant trading pushed growth stocks past their inexpensive brethren. Three Bays Capital and SPO Partners & Co., which sought to make wagers on undervalued stocks, closed in 2018. Mr Einhorn has repeatedly expressed his frustration with the poor performance this year, while remaining steadfast in his commitment to value investing.
Greenlight, which posted gains only in May and October, underperformed both the broader market and its peers in 2018. The S&P 500 Index dropped 4.4 per cent, including dividends, while the HFRX Global Hedge Fund Index, an early indicator of industry performance, fell 7 per cent through December. 28.
At the start of the year, Greenlight managed $6.3 billion in assets, according to a regulatory filing. By May, the firm was down to $5.5bn.
Company Profile
Company name: Hoopla
Date started: March 2023
Founder: Jacqueline Perrottet
Based: Dubai
Number of staff: 10
Investment stage: Pre-seed
Investment required: $500,000
The specs
Engine:+1.5-litre+turbo
Power:+181hp
Torque:+230Nm
Transmission:+6-speed+automatic
Starting+price:+Dh79,000
On+sale:+Now
TECH SPECS: APPLE IPHONE 14 PLUS
Display: 6.1" Super Retina XDR OLED, 2778 x 1284, 458ppi, HDR, True Tone, P3, 1200 nits
Processor: A15 Bionic, 6-core CPU, 5-core GPU, 16-core Neural Engine
Memory: 6GB
Capacity: 128/256/512GB
Platform: iOS 16
Main camera: Dual 12MP main (f/1.5) + 12MP ultra-wide (f/2.4); 2x optical, 5x digital; Photonic Engine, Deep Fusion, Smart HDR 4, Portrait Lighting
Main camera video: 4K @ 24/25/3060fps, full-HD @ 25/30/60fps, HD @ 30fps; HD slo-mo @ 120/240fps; night, time lapse, cinematic, action modes; Dolby Vision, 4K HDR
Front camera: 12MP TrueDepth (f/1.9), Photonic Engine, Deep Fusion, Smart HDR 4; Animoji, Memoji; Portrait Lighting
Front camera video: 4K @ 24/25/3060fps, full-HD @ 25/30/60fps, HD slo-mo @ 120fps; night, time lapse, cinematic, action modes; Dolby Vision, 4K HDR
Battery: 4323 mAh, up to 26h video, 20h streaming video, 100h audio; fast charge to 50% in 30m; MagSafe, Qi wireless charging
Connectivity: Wi-Fi, Bluetooth 5.3, NFC (Apple Pay)
Biometrics: Face ID
I/O: Lightning
Cards: Dual eSIM / eSIM + SIM (US models use eSIMs only)
Colours: Blue, midnight, purple, starlight, Product Red
In the box: iPhone 14, USB-C-to-Lightning cable, one Apple sticker
Price: Dh3,799 / Dh4,199 / Dh5,049
THE SPECS
Engine: 1.5-litre turbocharged four-cylinder
Transmission: Constant Variable (CVT)
Power: 141bhp
Torque: 250Nm
Price: Dh64,500
On sale: Now
A Cat, A Man, and Two Women
Junichiro Tamizaki
Translated by Paul McCarthy
Daunt Books
Company+Profile
Name:+Thndr
Started:+2019
Co-founders:+Ahmad+Hammouda+and+Seif+Amr
Sector:+FinTech
Headquarters:+Egypt
UAE+base:+Hub71,+Abu+Dhabi
Current+number+of+staff:+More+than+150
Funds+raised:+$22+million+
The five pillars of Islam