Will the Market Test Warsh

The report examines the historical precedent of financial markets 'testing' new Federal Reserve chairs, arguing that these tests are often precipitated by the chairs' own hawkish initial policies.

Key Takeaways

• 1.Historical data suggests new Fed chairs often face significant market drawdowns, averaging 5% in the first month and 13% within three months.
• 2.Market 'tests' are frequently driven by the chairs themselves being hawkish early in their terms to establish credibility, rather than just market aggression.
• 3.Kevin Warsh is set to take office as Fed Chair on May 15, 2026, and markets are anticipating a potential rate hike later in the year.

Table of Contents

• Macro Picture - Chart Story
• WILL THE MARKET "TEST" WARSH?
• What do we mean by a market "test"?
• The market certainly tested Powell early on...
• But it isn't just the stock market that can test a new Fed chair
• Why do Fed chairs start out hawkish?
• The funny thing about that conversation...

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