Stock Market Update: Stocks Hit Record Highs with Biden Treasury Pick
News broke yesterday that President-Elect Biden will be nominating Janet Yellen for Treasury Secretary. The news buoyed the U.S. stock market to record highs, with Wall Street confident that Yellen’s Treasury Department will invest heavily in the U.S. economy until it recovers from the recession. Here’s what you need to know about Yellen, and the possibility of more stimulus money with her at the helm of the Treasury.
Who is Janet Yellen?
Yellen is an economist and policy expert who was most recently chair of the Federal Reserve (2014 to 2018). She is known to be a proponent of heavy government involvement in the economy, both in terms of investment and regulation. She is widely popular in the Democratic Party and respected by many moderate Republicans.
Yellen would be the first woman to hold the position of Treasury Secretary, and the first person to hold positions in the Federal Reserve, Treasury and White House Council of Economic Advisors (which she served during the Clinton Administration).
Yellen stated in October that the U.S. economy needed “extraordinary fiscal support” throughout the pandemic to recover, so hopes are high she will negotiate with Congress and the Federal Reserve to create a second stimulus package and reduce unemployment.
Why Have Stocks Jumped Since the News Broke?
The Dow Jones industrial average hit a record 30,000 this week after the news of Yellen’s nomination, and the S&P 500 jumped 1.6%, according to the New York Times. The stock market’s banner day indicates investors’ confidence in Yellen and Biden’s entire transition team after months of economic uncertainty.
“The former Fed chair is a welcome choice for investors, increasing the chances of strong coordination of fiscal and monetary policy,” wrote analysts at the wealth management firm UBS.
Gene Sperling, an advisor to both Clinton and Obama, called Yellen “a brilliant choice”, and her understanding and management of complex economic issues “masterful”.
Can Yellen Act Without Congress?
Yellen will need to coordinate with Congress to create meaningful action on a second stimulus bill. She will need congressional approval to re-use $455 billion in remaining CARES Act funds, according to current Treasury Secretary Steve Mnuchin. Yellen holds more bipartisan support than her predecessor, but still could face obstacles with Republicans.
Conclusion: Investors Are Confident in Yellen
Despite potential challenges, the news of Janet Yellen’s nomination as Treasury Secretary has brought back confidence to American markets. Stimulus advocates are confident, especially with Yellen’s experience at the Federal Reserve, that she will authorize further COVID-19 aid.