October 2, 2017, 4:00 pm EST

Stocks open the week with another record high.  The dollar continues to do better. And as we open the new month, yields are now up 32 basis points from the lows of early last month.

​That’s a dramatic shift in the interest rate environment.  And in recent days, underpinning that strength, is the idea that a hawk could be taking over for Janet Yellen when her term ends at the end of January.

​Over the past few days the President has met with candidates for the Fed Chair job, and has said he will be announcing his decision in the next two to three weeks.  That’s a big deal for markets and the economy — something to keep a close eye on.

​His interview last Thursday was with a known hawk, former Fed governor Kevin Warsh  – who has publicly criticized the Fed for keeping rates too low.  He was also a hawk through some of the darkest days of the recovery – he’s been proven wrong for that view.  As for Yellen:  She has been among the most dovish Fed members throughout the crisis but has been leading the rate normalization phase (i.e. higher rates), which has proven to be questionable judgment, with missteps along the way resulting from the Fed’s overly optimistic and hawkish outlook.

​​Interestingly, though Trump criticized the Fed for keeping rates too low throughout the recovery, it’s higher rates, now, that are a significant threat to his growth policies.  So he needs the Fed to step out of the way, and do no harm to the hand-off from a monetary policy-driven recovery, to a fiscal policy driven-recovery.  Higher rates can choke off the positive effects of tax cuts and government spending.

​On that note, his friend on monetary policy should be (and I think will be) Neel Kashkari (a new Fed member).  Kashkari has been the lone dissenter on the Fed’s tightening path, arguing along the way to let the economy run hot, to ensure a robust recovery, before moving on rates.

​Over the past two years, Yellen has blamed their pauses in their tightening program to the lack of evidence that the economy is overheating.  It’s safe to say that the economy is not overheating (nor has it been), with both growth and inflation still undershooting long run averages.