The U.S. economy has dodged a number of bullets in recent weeks. It emerged from the 16-day government shutdown bruised but not broken. More importantly, it avoided going over the precipice when Congress came to a last-minute agreement to raise the debt ceiling and avoid sending the United States into default.
But according to David Kotok, co-founder and chief investment officer of Cumberland Advisors, the American economy is not out of the woods yet. Speaking on CNBC, Kotoc said he had expected big gains for stocks in the coming months, until last Friday. That’s when Sen. Rand Paul threatened to hold up the nomination of Janet Yellen for Federal Reserve chief. The senator wants a vote on his bill, the Federal Reserve Transparency Act, that would require a complete audit of the Fed.
In order to block Yellen’s appointment, Paul would need 40 other senators to join his effort.
Kotok said that holding up Yellen’s confirmation "threatens the recovery in the stock market. It introduces another uncertainty about Fed policy. It alters the view of a smooth transition in the leadership of the central bank."
Analysts contend that the Fed is one of the main reasons stocks continue to rise. It has kept interest rates low, allowing consumers to purchase homes and helping businesses borrow to grow. Kotok said that Paul’s threat to the continuity of Fed leadership puts all of that at risk.
“If left alone, the Fed will resolve its policy," Kotok said on Yahoo's Daily Ticker. "Now we have to contend with another political issue that makes no logical sense. This is not about Janet Yellen so why have it interfere?"