No. 2 – Abe’s Gamble For Japan
Recently, Japanese Prime Minister Shinzo Abe called for snap elections, says Hooper, possibly to win a mandate for applying a stronger hand when dealing with North Korea and to gauge support for a stimulus package. However, recent snap elections, like those called by U.K. Prime Minister Theresa May, have resulted in weakened governments and less clarity on the direction of future policies. Any weakening of Abe’s position may also lead to a crippled Japanese economy.
No. 3 – Leadership Questions At the Fed
Hooper is pessimistic that Janet Yellen will continue as chair of the Federal Reserve after her current term is up early next year, as President Donald Trump has already started meeting with candidates for her position and is expected to announce a nominee sometime in the next few months. In addition, three other seats at the Fed are open, including the vice chair.
“Yellen’s recent speech at Jackson Hole hinted that she’s not really interested in a second term because she’s not interested in deregulation,” says Hooper. “I’m intrigued by the idea of a Neel Kashkari chairmanship, which could potentially be more dovish than Yellen’s, but with this administration, it could be someone who is an unknown quantity who causes some additional anxiety in the markets.”
Uncertainty around the president’s eventual selection hasn’t moved the markets to date, says Hooper, but that might change as we close in on an announcement, especially if Trump chooses a non-traditional nominee that faces intense Congressional scrutiny during the confirmation process. When named, the nominee might also provide some insight to market participants about the future course of monetary policy.
No. 4 – China Looks Forward
The 19th Congress of the Chinese Communist Party will be held later this month. The meetings—held every five years—set the stage for the country’s future political and economic leadership. This Congress, held at the midpoint of President Xi Jinping’s 10-year term, would typically include the emergence of a new leader likely to succeed the president at the end of his turn.
“My expectation is that President Xi will consolidate power, that will be telegraphed loud and clear through this Congress,” says Hooper. “If Xi is able to do this, I expect that he will be even more vocal with regards to the U.S. and push back more forcefully on criticisms on trade and North Korea.”
Hooper also says that the Chinese Congress will include an assessment on the country’s progress towards economic prosperity and social cohesion that will likely guide its political and economic agenda moving forward.