Fed Chair Succession = US Stock Market Plunge?

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坦途宏观2026/05/10 06:27

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By:坦途宏观

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Several clients have asked about the widely circulated chart showing "U.S. stocks falling after a new Fed chair takes office" in recent days. Here we offer a brief discussion.

Figure 1: Fed Chair Replacement = Major S&P500 Drawdown

Fed Chair Succession = US Stock Market Plunge? image 0

1. I don't know whether this so-called "maximum 6-month drawdown" is calculated as:

A) The lowest point within six months after taking office minus SP500 at the time of appointment, or

B) The lowest point within six months minus the highest point within those six months.

But regardless of the method, the data in this chart are incorrect.

2. Take Powell as an example. He was sworn in on February 5, 2018, whereas the early 2018 flash crash occurred on January 26. Using calculation A, the maximum drawdown within six months of Powell’s appointment was 2.56%. Using calculation B, the max drawdown was 9.45%—both significantly lower than what’s shown in the chart.

3. Furthermore, regardless of which drawdown calculation is used, the maximum drawdown within six months of a Fed chair taking office is not significantly different from the maximum drawdown over any random six-month period in S&P500 history.

4. Using calculation A:

1) The maximum six-month drawdowns after the last seven Fed chair appointments are as follows:

Burns (1970-02-01): 19.20%
Miller (1978-03-08): 0.00%
Volcker (1979-08-06): 4.25%
Greenspan (1987-08-11): 32.82%
Bernanke (2006-02-01): 4.58%
Yellen (2014-02-03): 0.00%
Powell (2018-02-05): 2.56%

Median: 4.25%

2) Distribution of maximum S&P500 drawdowns over any six-month period in history:
10th percentile: 0.09%
25th percentile: 1.44%
75th percentile: 8.98%
90th percentile: 16.24%

Median: 4.12%

The medians are nearly identical. Statistical tests for equality of means: t-test p=0.2870, Wilcoxon test p=0.3438; there is no significant difference.

5. Using calculation B

1) The maximum drawdowns for the last seven chairs within six months of taking office:
Burns (1970-02-01): 23.21%
Miller (1978-03-08): 17.12%
Volcker (1979-08-06): 13.31%
Greenspan (1987-08-11): 33.51%
Bernanke (2006-02-01): 7.70%
Yellen (2014-02-03): 12.38%
Powell (2018-02-05): 9.45%

Median: 13.31%

2) Distribution of maximum S&P500 drawdowns over any six-month period in history:
10th percentile: 7.80%
25th percentile: 9.97%
75th percentile: 17.74%
90th percentile: 22.12%

Median: 12.99%

Again, the medians are almost identical, and statistical tests for equality of means yield p=0.5516, p=0.8854; no significant difference.

6. In summary, by historical pattern, significant drawdowns in U.S. stocks occur almost every six months, this is the historical norm, and the next six months will likely be no exception. Moreover, given that U.S. equity valuations are at historically high levels, future drawdown magnitudes may even exceed the historical medians.

7. For example, the S&P500's current CAPE (Case-Shiller cyclically adjusted PE ratio) is as high as 39.58x, inside the historical 95th percentile. According to a 100-year backtest, when CAPE is at a high level (80–100th percentile), the median S&P500 return over the next 60 months (annualized +4.32%) is significantly lower and max drawdowns (-19.40%) are significantly higher. However, differences in the short-to-medium term (3–24 months) are not obvious.

Figure 2: CAPE

Fed Chair Succession = US Stock Market Plunge? image 1

Table 1: CAPE Percentile vs. Future Returns/Maximum Drawdown

Fed Chair Succession = US Stock Market Plunge? image 2

8. In other words, Kevin Warsh taking office—if unexpectedly hawkish—could act as the trigger for a (significant) U.S. equity correction, but this does not mean that a change in Fed chair inherently carries any asset implication. This chart—both its data and logic—is AI-generated garbage (PS: well, this statement itself may also undermine AI’s own valuations).

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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智通财经•2026/09/21 09:31