Barclays warns: History shows that when the Federal Reserve Chair changes, the US stock market faces an average 16% correction

A Barclays report indicates that within six months of a Federal Reserve chair change, the S&P 500 typically declines by an average of 16%. Hawkish Kevin Warsh is about to succeed Jerome Powell, and the market faces liquidity tightening risks.
(Background: Microsoft plunges 9.9%, market cap evaporates $357 billion—“second worst in U.S. stock history,” what happened?)
(Additional context: Gold and U.S. stocks at all-time highs—how to hedge? CFD hedging strategies analysis)

According to a Bloomberg summary of Barclays’ latest report, since 1930, whenever the Federal Reserve (Fed) changes its chair, the S&P 500 has an average decline of up to 16% within the following six months.

In May 2026, current Chair Jerome Powell is set to step down, with Trump-nominated Kevin Warsh taking over. Why does a new appointment shake the secondary market? The reason is simple: markets fear uncertainty more than bad news.

In recent years, although Powell has occasionally been hawkish, the market has figured out his “cards,” knowing he can soften his stance at critical moments—what’s called the “Fed Put.” But historical data shows that power transitions are often times when risk control models fail. That 16% average decline actually reflects the market re-pricing for a “new policy style.”

Currently, both U.S. stocks and cryptocurrencies are at high levels. Any small disturbance can be amplified, triggering a chain reaction of margin calls.

Alexander Altmann report chart

Warsh’s Hawkish Stance: Draining Liquidity

Warsh is not the typical dovish market participant. A few years ago, he publicly criticized quantitative easing (QE) for distorting asset prices and strongly advocated for more aggressive balance sheet reduction (QT).

What does this mean? It’s like draining liquidity directly from the system. The asset premiums we’ve enjoyed over the past few years have largely been supported by central bank balance sheet expansion. If Warsh truly implements his stance, it’s not just about raising interest rates but directly shrinking the monetary base. For meme coins built on capital and unprofitable tech growth stocks, this is a direct blow. That’s why some within the Republican Party support him—they believe bursting the bubble is necessary to return to normal.

Potential Policy Clash Between Trump and Warsh

Here’s an interesting game. Trump, who likes to use the stock market as a gauge of his performance, wants low interest rates to stimulate the economy. Ironically, he has chosen a hardliner who is most likely to keep rates higher for longer.

According to ABC News, Warsh’s policy expectations could clash with the White House. The market has not fully priced in this risk yet.

In simple terms, the May transition is an opportunity for a reshuffle. If Warsh acts, the dollar could strengthen due to liquidity scarcity, which would be negative for all risk assets priced in USD. Gold and Bitcoin, as tools to hedge against fiat inflation, might be suppressed in the short term due to rising real interest rates, but in the long run, systemic risks could trigger unpredictable outcomes.