Monetary Policy is What 'Really Moves Markets,' Not Geopolitics, Says PwC's Alexis Crow

Alexis Crow, Partner & Chief Economist at PwC US, analyzes why diversification away from the US and toward Europe and EM is becoming increasingly important for investors.

European stocks posted their fifth straight weekly advance as investors remained confident about artificial intelligence demand. Novo Nordisk A/S jumped 6.5% after the UK regulator approved a higher dose of its obesity drug.

The Stoxx Europe 600 Index was little changed by the close, but still posted a 0.8% advance for the week. Energy and utilities outperformed on Friday, while consumer products and mining sectors were among the biggest laggards.

The luxury sector declined, dragged down by Richemont SA, which received a downgrade from Bank of America Corp. Analysts said the firm faces margin pressure from foreign exchange, gold and tariffs.

European equities have hit multiple all-time highs this week, as lingering optimism about potential fiscal stimulus and economic growth outweighed geopolitical concerns.

Hopes for another buoyant day across asset classes were deflated at midday over concern President Donald Trump is cooling on his dovish front runner to head the Federal Reserve.

Treasuries dropped across the curve as traders slightly dialed back expectations for Fed rate cuts this year. The S&P 500 struggled to gain much traction and was heading toward a weekly decline despite a rally in giant chipmakers. Small caps kept rising, with the Russell 2000 beating the US equity benchmark for an 11th straight session.

Trump on Friday said if Kevin Hassett were to leave his post as director of the White House National Economic Council, it would deprive the administration of one of its most powerful messengers on the economy. He has been seen as a top contender to succeed Fed Chair Jerome Powell.

In an interview with Reuters earlier this week, Trump suggested he was considering both Hassett and former Fed Governor Kevin Warsh for the role, among others.

“If I had to pick between the two Kevin’s, I’d go with Hassett over Warsh,” said Neil Dutta at Renaissance Macro Research. “So crushing Hassett only helps Warsh. We know that Kevin Warsh has been hawkish his entire career. He hates inflation even when it is running below the Fed’s target. It would be an interesting choice given the President’s policy views.”

The S&P 500 was little changed. A closely watched gauge of chipmakers climbed 1.4%. The Russell 2000 added 0.5%. The yield on 10-year Treasuries climbed three basis points to 4.20%. The dollar wavered.

“I actually want to keep you where you are, if you want to know the truth,” Trump told Hassett during a White House event. “If I move him, these Fed guys — certainly the one we have now — they don’t talk much. I would lose you. It’s a serious concern to me.”

Trump’s remarks that he would like to keep White House advisor Hassett in his current seat catapult Warsh into pole position in the race to succeed Powell as Fed chair, while adding a little to Christopher Waller’s chances, according to Krishna Guha at Evercore.

“It is not certain this is a definitive signal – the President has given various signals at various times and appears to enjoy the drama of this Celebrity Apprentice season – but it does look as if the former Fed governor is for the first time the clear front-runner,” he noted.

What would a Warsh Fed chairmanship mean?

“We think near term through end 2026 he would be more or less as dovish as Hassett would be on the basis of supply side optimism, the difference is that he would be more likely to revert to older hawkish

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