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Why the confirmation hearings may be important to markets | Frank Kelly

1/9/2025

Trump's cabinet picks get their confirmation hearings next week – But will they tell markets anything on policy?

Francis (Frank) J. Kelly

Founder & Managing Partner, Fulcrum Macro Advisors LLC and Senior Political Strategist for DWS

How coordinated are Trump's nominees with the President-elect on policy issues?
Now that Republicans control the Senate, just how compliant and deferential will Senate Republicans be to President Trump on his major policy proposals?
Tariffs, Mass-Deportation, Greenland/Canada/Panama Canal
The next step
Schedule of hearings

The Presidential Inauguration is days away (January 2025), but the new Congress is up and running. The first order of business for the new Senate Republican majority – aside from its ongoing wrestling match with President-elect Trump on how to proceed on renewing the Tax Cuts and Jobs Act (Trump's 2017 Trump tax bill), moving border security legislation, and the 2025 budget (one Reconciliation bill or two?) – is successfully conducting the confirmation hearings of Trump's cabinet selections. The schedule from the respective Senate committees for those hearings is now out (see the hearing schedule below).

Why the confirmation hearings may be important to markets

At this point, we believe most – if not all – of the President-elect's nominees will ultimately be confirmed (although we are expecting serious opposition to several of the nominees including Defense Secretary-nominee Pete Hegseth and Director of National Intelligence nominee Tulsi Gabbard). But this set of confirmation hearings is likely to be uniquely important to markets as they will shed significant light on, we believe, two major factors for the next two years:

How coordinated are Trump's nominees with the President-elect on policy issues? Are they helping to set the policy agenda for their respective agencies with Trump and the incoming White House team, or are they simply executing policies the President himself alone truly sets? And – putting aside President-elect Trump's massive and wide-reaching commentary on policy issues either verbally or by tweet, which policy issues will actually be the primary focus of the respective departments and agencies, and which look to be secondary or tertiary? And how will the nominees actually carry them out?
Now that Republicans control the Senate, just how compliant and deferential will Senate Republicans be to President Trump on his major policy proposals? Our view is, based on our conversations and observations, while Republicans will do their utmost to show a strongly unified front in showing their support for President Trump and his policy agenda, a careful listen to the hearings may show pressure points – even tiny cracks. What we see and hear from Republican Senators and staff behind closed doors about many of Trump's policies publicly are not the same as what they say publicly. Three examples:

Tariffs: will Treasury Secretary-nominee Scott Bessent, Commerce Secretary-nominee Howard Lutnick, and State Department-nominee Marco Rubio say in response to a likely barrage of questions about Trump’s much discussed tariff regime. How will they explain – in more detail than Trump has done – how it will work, when will it be implemented, and their views on retaliatory tariffs on US goods and services?
Mass-Deportation: Despite all the talk of mass deportations, we are starting to hear businesses weighing in (carefully, quietly) that mass deportations would, in fact, hurt the economy. Many small businesses simply need the workforce illegal immigrants have provided them, and mass deportations will damage their businesses and, ultimately, economic growth. Will we get a sense of Republican Senators trying to navigate this issue in the confirmation hearings of Homeland Security Secretary-nominee Kristi Noel, Attorney General-nominee Pam Bondi, and Office of Management and Budget-nominee Russell Voight (who will likely be asked how it will be paid for)?
Greenland/Canada/Panama Canal: What does Secretary of State-nominee Marco Rubio say to questions around Trump's statements of wanting to buy Greenland, making Canada the 51st state, and possibly using the military to take back the Panama Canal? What does Defense Secretary-nominee Pete Hegseth say in response to questions about the use of the military in Panama (as President-elect Trump has suggested) and doesn’t Congress have to authorize the use of troops?

The next step

Once we get through these hearings, the next step will be each of the nominees being approved by the respective committees and then having their nominations reported to the full Senate for approval. How that goes depends largely on the confirmation hearings. Senate Majority Leader John Thune (R-SD) can only lose three Republicans on a nomination or risk defeat for a nominee.

We would also note that Thune is gaming out which cabinet nominees he can actually get confirmed on Inaugural Day (January 20) and sworn immediately into office. Top of that list is Marco Rubio and Scott Bessent.

Normally, confirmation hearings are tightly scripted, and nominees are well-prepared to avoid getting into policy debates. These will not be "normal" hearings, and this is not going to be a normal presidential administration. Our view is markets should plan to pay closer attention to the confirmation hearings that most impact the sectors they are focused on.

Schedule of hearings

Tuesday, January 14th

Senate Armed Services Committee: Pete Hegseth, Secretary of Defense
Senate Energy and Natural Resources Committee: Doug Burgum, Secretary of the Interior
Senate Committee on Veterans Affairs: Doug Collins, Secretary of Veterans Affairs

Wednesday, January 15th

Senate Agriculture Committee: Brooke Rollins, Secretary of Agriculture
Senate Energy and Natural Resources Committee: Chris Wright, Secretary of Energy
Senate Judiciary Committee: Pam Bondi, Attorney General
Senate Environment and Public Works Committee: Lee Zeldin, Administrator of the Environmental Protection Agency (Possibly Thursday, 1/16)
Senate Foreign Relations Committee: Marco Rubio, Secretary of State
Senate Intelligence Committee: John Ratcliffe, Director of the Central Intelligence Agency
Senate Committee on Homeland Security and Government Affairs (Morning): Kristi Noem, Homeland Security Secretary
Senate Committee on Homeland Security and Government Affairs (Afternoon): Russell Vought, Office of Management and Budget Director

Thursday, January 16th

Senate Finance Committee: Scott Bessent, Secretary of the Treasury
Senate Foreign Relations Committee: Elise Stefanik, U.S. Ambassador to the United Nations

Monday, January 27th

Senate Finance Committee: Robert F. Kennedy Jr., Secretary of the Department of Health and Human Services (Not Confirmed)

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Francis (Frank) J. Kelly

Frank is the Founder and Managing Partner of Fulcrum Macro Advisors LLC, a political risk advisory firm based in Washington, DC. He is the senior political strategist for DWS.

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Why the confirmation hearings may be important to markets | Frank Kelly

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