Former Federal Reserve Board Chair Janet Yellen could become the first Fed chair to serve two non-consecutive terms, according to PGIM Fixed Income chief economist Nathan Sheets.
Current Fed Chair Jay Powell’s term expires in 2021. Speaking in a webcast this morning, Sheets said it always was possible that Powell could be reappointed. But new presidents often like to appoint their own Fed chairs.
Sheets cited Yellen’s empathy and skills at communicating as factors working in her favor. Moreover, she is known as one of the nation’s leading labor economists and, at the present time with millions of Americans still out of work, those skills could be perceived as particularly important.
Sheets, like many other observers, said current Fed governor Lael Brainard is the likely candidate to become Treasury secretary in a Biden administration. He called that "good news," and added she was the best person for the position.
Brainard also has many supporters. She voiced caution in 2017 and 2018, Sheets said. That was at the same time that Jay Powell's Fed was raising interest rates, much to the displeasure of President Trump. Moreover, she proved to be an asset in structuring Fed programs during the onset of the pandemic earlier this year.
Sheets is well-connected in the economic hierarchy of the Democratic Party. He served as Undersecretary of the Treasury for International Affairs in the Obama administration. He expects Congress to pass another $1 trillion fiscal stimulus program that will be distributed to small businesses, statees and other municipalities and unemployed wrokers.
The latter group including people in the bottom half of the income distributed are the most vulnerable in his view. However, if the Pfizer vaccine proves to be as successful as initial results indicate, it could be a more significant transformational event than a second round of stimulus.
Asked about the direction of the U.S. dollar, Sheets said, “President Biden is likely to get the weak dollar that President Trump wanted.”
That view was shared by his fellow PGIM executives, Ed Campbell, portfolio manager of its QMA unit, and Katherine Neiss, PGIM's chief European economist. Campbell, Neiss and Sheets shared the perspective that emerging markets represented a solid option when it comes to playing the post-pandemic investment world.
Emerging market debt and equities are "really" cheap. Asset prices in developing nations have "meaningful room to run," Sheets says.
Campbell also noted that many emerging economies tend to be "more cyclically oriented" so exposure to them positions portfolios for a global recovery.
While U.S. equities are quite expensive, he thinks they become more attractive when one considers the alternatives. For example, asset classes like commercial real estate, ranging from office buildings to shopping malls, look "impaired" as a result of the pandemic.