Potential Impact of New Federal Reserve Chair on U.S. Stock Market

On February 3, Barclays highlighted that since 1930, the S&P 500 Index has typically seen an average decline of about 16% within six months of a new Federal Reserve Chair taking office. According to BlockBeats, this drop is notably higher than usual market corrections. If Kevin Warsh assumes the role in May, U.S. stocks may face renewed pressure. The report suggests that new chairs often encounter market 'tests' shortly after their appointment. Following U.S. President Donald Trump's nomination of Warsh to replace Powell, the stock market has already experienced a downturn, with investors perceiving Warsh as not being a dovish candidate. Analysts believe that amid controversies over the Federal Reserve's independence, high inflation, and slowing employment, a leadership change could heighten uncertainty in monetary policy. If Warsh advocates for balance sheet reduction, it might further drain liquidity and negatively impact risk assets. However, his hawkish stance on the balance sheet could help suppress gold prices and temporarily support the dollar.