by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment begins with an analysis of the president’s forthcoming decision for the next Federal Reserve chair. We then examine the growing trend of state-level intervention in the national economy and provide insights on the Tennessee special election as well as the potential alliance between the UK’s Reform and Conservative parties. We conclude with an essential roundup of key domestic and international data releases to keep you informed.

Fed Chair Nominee Delay: The White House has delayed the announcement of the president’s nominee to lead the Federal Reserve until early 2026. This decision follows reports that National Economic Council Director Kevin Hassett was the frontrunner to succeed current Fed Chair Jerome Powell when his term expires next May. The postponement suggests the president has yet to finalize his selection for the central bank’s leadership, as he seeks a candidate who can simultaneously respect market sensibilities while fulfilling his desire for interest rate cuts.

• The White House had previously narrowed the shortlist for the Federal Reserve chair to three officials: former Fed Governor Kevin Warsh, current Fed Governor Christopher Waller, and Kevin Hassett. While Hassett and Warsh have enjoyed particular favor with the president — having both served as key economic advisors — financial markets have generally expressed a preference for Waller to lead the central bank.
• The White House’s delay in naming a nominee is likely a ploy to build political momentum for Kevin Hassett, who faces intense scrutiny over his reputation as a partisan loyalist. This strategic caution is warranted by the president’s failures during his first term, where polarizing candidates like Marvin Goodfriend and Judy Shelton both failed to secure confirmations due to bipartisan concerns over their ideological beliefs.
• While the president successfully confirmed Stephen Miran to the Federal Reserve Board this term, the chairship faces a substantially higher hurdle. The nominee’s role is critical given the central bank’s current internal division. Recent FOMC meeting minutes revealed a sharp debate among officials over whether to prioritize maximum employment or price stability within the dual mandate. As a result, the new chair could potentially serve as the crucial swing vote determining the Fed’s near-term policy direction.
• US equities remain highly focused on monetary policy, particularly as big tech companies pivot from cash-funded to debt-funded capital expenditures. Recent market pessimism regarding a likely Fed pause in December, which keeps borrowing costs high, has resulted in a broad sell-off of tech stocks, driven by worries over the viability of their large-scale financing plans.
• Federal Reserve policy and the specter of political interference have significantly influenced fixed income and international equity investors. Concerns over a potential loss of Fed independence — and the resulting threat of rising inflation — have reduced the appetite for US Treasurys and the dollar. This pivot toward foreign markets is a major factor in the outperformance of international versus domestic equities that has been observed this year, as investors seek refuge from presidential influence over monetary policy.

Government Support: The US government continues to demonstrate a growing willingness to intervene directly in the economy as it works to strengthen domestic supply chains. On Tuesday, officials announced up to $150 million in funding for chip-technology startup xLight. The administration also awarded $800 million to two energy companies to support the development of new nuclear power plants. Together, these actions reinforce the view that equities tied to strategically important industries stand to benefit from sustained government support.

• Investment in xLight is a strategic move and reflects the US goal of fostering a domestic competitor to the advanced lithography equipment produced by the Netherlands’ ASML. These highly specialized machines are crucial for manufacturing the cutting-edge, nanoscale semiconductors that power modern technology. Developing an alternative to an allied nation’s dominant technology underscores the US commitment to supply-chain resilience and technological self-sufficiency.
• The US is strategically investing in energy companies to ensure the scalability of domestic power production. Specifically, funding for nuclear power plants is being prioritized to meet the steep rise in electricity demand driven by the proliferation of data centers. By expanding supply through nuclear reactors, the US aims to satisfy this industrial demand surge and mitigate potential increases in household utility costs.

• Direct US intervention stabilizes businesses but restricts new owners. Nippon Steel, for example, reported a net loss months after acquiring US Steel in June. The firm’s ability to implement profitability boosting changes is limited because the US holds a “golden share,” which provides veto power over key decisions and inhibits swift restructuring.
• We maintain our view that the US economy is gradually shifting away from the laissez-faire model of the past four decades. This trend toward greater state intervention will likely support corporate earnings stability but may reduce incentives for efficiency gains. Consequently, while equity valuations could continue to rise, corporate focus on long-term profitability may wane. Investors should therefore prioritize portfolio diversification to mitigate potential future volatility.

 Tennessee Special Election: Republican Matt Van Epps defeated Democrat Aftyn Behn for a House seat on Tuesday with a 9-point margin (54% to 45%), in a contest viewed as a barometer for 2026. While the victory offers the White House confidence, Behn’s strong performance in a deep-red district indicates a mixed signal. This political backdrop continues to suggest the likelihood of further stimulus measures, such as tariff rebate checks, which should boost near-term economic growth and market performance next year.

Protectionist EU: Brussels is preparing to significantly increase domestic sourcing requirements for companies operating within the bloc. The proposed law, which would require up to 70% of content in certain products (such as cars) to be sourced domestically, could cost companies an estimated 10 billion EUR ($11.6 billion) annually. Though the final draft is pending (expected December 10), this measure strongly signals the EU’s heightened commitment to boosting its own industrial competitiveness and reducing reliance on foreign, particularly Chinese, exports.

Populist Acceptance: In a reflection of the global rise of populism, the UK Reform Party has announced it may agree to an electoral deal with the Conservative Party ahead of the next general election. This move underscores the growing international support for fringe parties, as voters increasingly seek alternative policies focused on cracking down on immigration and combating high inflation.

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