A lot of analysts are talking about how the S&P500 drops after a new Fed Chair is appointed based on the recent Barclays research but this leans waay too hard on max drawdowns inside the given window and not actual cumulative returns.
Pikcing the worst moment within 1,3, 6 or 12 months after a new Fed Chair takes office and treading it as the headline is cherrypicking.
For example - Jerome Powell’s first year. Yes, stocks fell around the start of his tenure, but part of that weakness came during a correction already underway, after markets had long since digested his nomination. Later in 2018, a much steeper correction hit for reasons that weren’t simply about who occupied the Fed chair (hdge funds had to dump stocks to meet redemption requests, but that's not the point of the post).
The 12 Month cumulative results are v different:
|Cumulative Returns After|Each New Fed Head Took Office|||
|:-|:-|:-|:-|
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|Name|Start Date 1 Month 3 Month|6 Month|12 Month|
|Eugene Meyer|9/16/1930 -14.1% -29.5%|\-18.30%|\-43.40%|
|Eugene Black|5/19/1933 10.3% 19.0%|11.60%|10.80%|
|Marriner Eccles|11/15/1934 -1.0% -2.1%|55.50%|43.50%|
|Thomas McCabe|4/15/1948 0.7% 9.9%|5.60%|\-1.90%|
|William McChesney Martin|4/2/1951 4.9% -2.4%|9.30%|12.60%|
|Arthur Burns|2/1/1970 5.3% -4.1%|\-8.20%|12.70%|
|William Miller|3/8/1978 3.2% 14.6%|20.70%|12.70%|
|Paul Volcker|8/6/1979 2.3% 6.9%|10.20%|16.10%|
|Alan Greenspan|8/11/1987 -3.3% -27.1%|\-21.80%|\-20.20%|
|Ben Bernanke|2/1/2006 0.0% 2.4%|\-0.30%|12.40%|
|Janet Yellen|2/3/2014 4.3% 5.5%|8.00%|13.40%|
|Jerome Powell|2/5/2018 -2.6% -3.6%|2.80%|\-1.30%|
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|**Average**|**0.8% -0.9%**|6.30%|**5.60%**|
|**Median**|1**.5% 0.2%**|6.80%|**12.50%**|
Of course. there are some big negative numbers like Eugene Mayer, but the Great Depression was already on its way
Burns was an accomplice of the Nixon admins price ant rate contros, which led to a bearmarket
Alan Greenspan took the chair two weeks before the bear market started, but was not the main reason behind it.
Also, the sample size is too early and does not tell you whether they commited monetary policy erros. Most of them did. For example Bernake was well into his second year when the Fed became a lender of last resort and panicked markets.
Point-to-point returns tell a different story than cherry-picked drawdowns as average and median returns after new Fed heads took office don’t look as doom and gloomy.
Having said that, the current situation does not imply a full risk-on, but presuming negativity because a new chair is going to be appointed is dangerous.
|Cumulative Returns After|Each New Fed Head Took Office|||||
|:-|:-|:-|:-|:-|:-|
|||||||
|Name|Start Date|1 Month|3 Month|6 Month|12 Month|
|Eugene Meyer|9/16/1930|\-14.10%|\-29.50%|\-18.30%|\-43.40%|
|Eugene Black|5/19/1933|10.30%|19.00%|11.60%|10.80%|
|Marriner Eccles|11/15/1934|\-1.00%|\-2.10%|55.50%|43.50%|
|Thomas McCabe|4/15/1948|0.70%|9.90%|5.60%|\-1.90%|
|William McChesney Martin|4/2/1951|4.90%|\-2.40%|9.30%|12.60%|
|Arthur Burns|2/1/1970|5.30%|\-4.10%|\-8.20%|12.70%|
|William Miller|3/8/1978|3.20%|14.60%|20.70%|12.70%|
|Paul Volcker|8/6/1979|2.30%|6.90%|10.20%|16.10%|
|Alan Greenspan|8/11/1987|\-3.30%|\-27.10%|\-21.80%|\-20.20%|
|Ben Bernanke|2/1/2006|0.00%|2.40%|\-0.30%|12.40%|
|Janet Yellen|2/3/2014|4.30%|5.50%|8.00%|13.40%|
|Jerome Powell|2/5/2018|\-2.60%|\-3.60%|2.80%|\-1.30%|
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|Average||0.80%|\-0.90%|6.30%|5.60%|
|Median||1.50%|0.20%|6.80%|12.50%|