MW Warsh gets a much warmer Wall Street welcome as Fed chair than his recent predecessors
By Tomi Kilgore
For only the 10th time in the past eight decades, a new Fed Chair is sworn in. Stocks are rising, as usual, although the last two swear ins saw sharp selloffs.
Wall Street greeted new Fed Chair Kevin Warsh - shown at his Senate conformation hearing - with a rally, which has usually happened during leadership changes.
Something happened on Friday that even Wall Street old-timers have only seen a few times in their careers. A new Federal Reserve Chair was sworn in.
But this time marked a change from recent swearing-ins, in which Wall Street had rolled out starkly red carpets. On Friday, the stock market showed green, with the S&P 500 index SPX up 0.7% in midday trading, which history suggests is a much more typical market welcome.
With Kevin Warsh taking hold of the Fed's reins, he becomes just the 10th chair of the U.S. central bank since 1948 and just the third in the past 20 years.
When Jerome Powell took charge on Feb. 5, 2018, the S&P 500 tumbled 4.1%, and when Janet Yellen started leading the Fed on Feb. 3, 2014, the S&P 500 dropped 2.3%, according to Dow Jones Market Data.
However, the five Fed changeovers before that - there was a big gap between when Ben Bernanke took charge on Feb. 1, 2006, and when Alan Greenspan became chair on Aug. 11, 1987 - all saw the S&P 500 gain ground.
In total, the S&P 500 gained daily ground during six of the nine handovers since 1948, with a median move-up of 0.2%, which compares with the average daily move for the S&P 500 since 1948 of a gain of 0.04%, according to Dow Jones Market Data.
One month after the swear-ins, the median gain for the S&P 500 was 3.2%, but the index was down a median of 1.4% three months later. On a rolling three-month basis since 1948, the S&P 500 has been up an average of about 2.2%, according to Dow Jones Market Data.
To be sure, that's not much of a statistical sample.
But on Friday, while the S&P 500 was rising, seeing Treasury yields hover around the highest levels in years, as oil prices and inflation remained stubbornly above the Fed's mandated target rate of 2%, acted as a reminder that the markets won't necessarily cooperate with the new Fed chair.
Even though he was handpicked by President Donald Trump (who also had selected Powell in 2017 before becoming a public critic), who has pushed hard for lower interest rates to boost economic growth, the bond, equity, oil and currency markets appear to be telegraphing increasing inflation, which may force Warsh to go against the president's oft-stated wishes.
MarketWatch Live: Trump tells Warsh 'to be totally independent' at swearing-in ceremony
And what of surging longer-term Treasury yields? The Fed can control very short-term rates by changing its target for the fed-funds rate, which banks charge each other for borrowing overnight money. The Fed can have some influence on yields on longer-term Treasury yields by buying bonds, which expands the balance sheet.
Keep in mind that Warsh has been a vocal critic of how the Fed expanded its balance sheet. But so-called bond vigilantes may force him to change his tune.
Read: The bond market is already hiking rates as Kevin Warsh takes over as Fed's new chair.
What 'event' awaits Warsh?
The narrative among market participants is that new Fed chairs get tested in some way relatively soon, but, as B. Riley Chief Market Strategist Art Hogan says, there's "really no proof" of that historical pattern.
Sure, Alan Greenspan had to deal with the Black Monday stock-market crash two months after he took charge. But the financial crisis of 2008-09 and the COVID crisis of 2020 didn't hit until two years after new chairs had taken over at the Fed. Yellen had a relatively easy time leading the Fed.
Hogan said he believes the crises that challenged previous new Fed chiefs, and the one that could follow Warsh's swearing-in, are just part of "the natural flow of the market."
It does appear Warsh will have a fight on his hands, however, with not only inflation and higher longer-term interest rates but also with the Trump administration, and his own ideas about the Fed's balance sheet.
"There are just so much 'whistling past the graveyard' you can do," Hogan said.
Opinion: The new-Fed-chair 'curse' and $100 oil are already testing Kevin Warsh - and the stock market
-Tomi Kilgore
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(END) Dow Jones Newswires
May 22, 2026 12:27 ET (16:27 GMT)
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