We will miss Jerome Powell's chairmanship of the Fed. He is a nice guy. He did the best that he could as Fed chair from February 5, 2018, through May 15, 2026, when his term as chair expires. Nevertheless, he said he intends to remain a Fed governor for now. He can do so until his term on the Board of Governors expires on January 31, 2028.
President Donald Trump doesn't share our affection for Powell. He certainly wasn't nice to Powell. In any event, Trump focused more of his wrath on Iran today. The President posted a message on Truth Social expressing frustration with the stalled nuclear negotiations. He urged Iran to "get smart soon" and explicitly wrote, "NO MORE MR. NICE GUY!"
Reports from yesterday and today indicate that Trump has instructed his aides to prepare for an extended blockade of the Strait of Hormuz and Iranian ports. During a Situation Room meeting on Monday, he reportedly opted for this "prolonged squeeze" over more kinetic military options (like resuming bombing) or walking away from the conflict entirely. Secretary of State Marco Rubio noted earlier today that while the blockade is the current "safer" primary lever, the administration still has plans for "surgical" strikes in reserve should the deadlock continue.
The prospect of a prolonged stalemate—albeit with a ceasefire and a possible resumption of the shooting war at any time—pushed oil prices higher to around $110 a barrel this evening. The stock market took it in stride with a 0.3% drop so far this week (chart). On April 21, we (belatedly) recommended overweighting the S&P 500 Energy sector as a hedge against a prolonged blockade of oil from the Arabian Gulf. XLE is up 5.7% since then.
The bond market is starting to signal concerns that the energy shock might cause a more persistent, rather than transitory, inflation problem. The 10-year Treasury bond yield is up from 3.95% on February 27 (a day before the war started) to 4.25% this evening (chart). The widely used proxy for the 10-year expected inflation rate accounts for most of the increase. The Bond Vigilantes are starting to mutter: "No more Mr. Nice Guys."
