Andrew Curtayne: Milford Asset Management expert on the market reactions to the Federal Reserve changes

The state of the US Federal Reserve has always prompted responses from financial markets, but recent actions from the Trump administration have raised eyebrows.

Trump recently came out and said he was going to fire Federal Reserve Board member Lisa Cook earlier in the week.

Milford Asset Management's Andrew Curtayne unpacked the market reactions 

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Episode Transcript

Speaker 1 (00:09):
You're listening to a podcast from News Talk zed B.
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Speaker 2 (00:16):
Andrew Curtain Milford Acid Management is with us.

Speaker 3 (00:19):
Hey, Andrew Hidden, Heather, how are you.

Speaker 2 (00:21):
I'm very well, thank you. I'd imagine that the global
markets are pretty focused on what's happening with the Fed
Reserve this week. Yeah.

Speaker 3 (00:28):
Yeah, lots going on because we had Jackson Hole, which
was HOWLD Friday and over the weekend, and key message
coming out of that was that power was getting more
inclined to cut interest rates in the US next month.
So Marc's been racking a little bit to that. We
saw an inequity rally of a couple I was at
of one and a half percent on Friday night from that.

(00:49):
But the big news really on Monday was Trump came
out with quite a big surprise when he said he
was going to fire the Federal Reserve board member Lisa Cook.
So this is really created a lot of noise about
the independence of the Federal Reserve, which is meant to
be separate from the Trump administration and the US government. Yes,
so we'll see how that plays out over the rest

(01:11):
of the week.

Speaker 2 (01:12):
Now, Trump has been very vocal and wanting to lower
the interest rates. Does getting rid of Lisa Cook actually
achieve this?

Speaker 3 (01:19):
It does move things in his favor. So the Fed
works by a vote by twelve board members, and if
twelve board members vote to cut interest rates, then they
cut interest rates. Now, Lisa Cook has been against cutting
interest rates, so she's not aligned with what Trump wants.
If he removes her, he will likely appoint someone who

(01:42):
would be favorable to him and will be aligned with
cutting interest rates. Now he can propose someone and then
it gets voted through by the Senate, which he has
essential de facto control over, so he can push things
through in his favor.

Speaker 2 (01:57):
And does he actually have the power to fire her.

Speaker 3 (02:01):
Yeah, this is where it gets tricky. So the Federal
Reserve is independent from the government, so Lisa Cook does
not report or work for Donald Trump. What he is
trying to do is he's found an angle whereby they
are leaching that Lisa Cook's essentially conducted mortgage fraud back

(02:22):
in nowther it was twenty one to twenty two before
she was a Fed governor. If they can make a
case whereby this means she's not fit for the job.
Essentially if you've done mortgage fraud and you're in the
job which is sort of controlling your influencing interest rates,
it's not a great look. Then he may have a
case to remove it. However, this is likely going to

(02:42):
have to go to the courts. Both Trump and lis
Cook has said they were waiting to see what courts
will say, and the feed have said they were also
appined by whatever the courts say. So, look, it feels
like a little bit of a long shot at the moment,
but then he may have a potential avenue here.

Speaker 2 (02:57):
Interesting. Okay, now listen, we've got the Nvidia results tomorrow.
What are we expecting.

Speaker 3 (03:03):
Well, it's going to have to be a strong result
because nobody has rallied about one hundred and ten percent
since the recent loads of its share price in April,
so the market's clearly expecting some big numbers. What the
sort of the consensus out there is for revenue and
earnings to grow around about fifty percent year on year,
So that reflects incredibly strong demand for Navidia's AI chips.

(03:26):
It looks like they're going to have you know, they
should have decent numbers. The problem when you have such
a strong share price move over the last few months,
is that a little miss on these expectations can send
the share price down. However, our sort of base cases
that should should have decent numbers. I mean, if you
look at what's been going on in the AI space
over the last few months, it's all about more and

(03:47):
more spending. All the largest companies in the world, such
as Microsoft and Amazon, Meta Google, have been spending more
and more money on AI, which essentially means they're spending
more money on N video chips. So we expect the
demand Drake backdrop to be favorable enough that we shouldn't
see too many surprises coming to other results. However, it
is nvideo and the share price tends to be quite volatile,

(04:07):
so we'll see there it goes.

Speaker 2 (04:08):
Thanks for talking us, so I appreciate it, Andrew, Andrew Curtain,
Milford Asset Management.

Speaker 1 (04:13):
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