Warsh's Debut at the Fed: Oil Shock and Historic S&P 500 Drawdown Patent
Today, Kevin Warsh will chair a meeting of the U.S. Federal Reserve for the first time as its chairman. Markets are approaching this moment in an extremely tense atmosphere: oil has collapsed to 2026 lows, and traders are barely pricing in any rate cuts. The pressure on the new Fed chair is immense.
Rate Frozen, but Rhetoric Under the Microscope
According to CME data, the probability of keeping the rate in the 3.50–3.75% range exceeds 97%. Analysts agree that the chances of policy easing remain nearly zero until April 2027, and only by December 2027 do they rise to a meager 8%. Thus, the key intrigue of today's meeting is not the rate decision itself, but how Warsh will craft his rhetoric. The market will closely watch whether he demonstrates monetary policy independence or yields to pressure from the Trump administration.
Historical Pattern: Change of Fed Chair = Market Decline
Analyst Bull Theory highlights a troubling statistic: over the past hundred years, with each of the 12 changes in Fed chairmanship, the S&P 500 index fell within the first 90 days of their tenure. The average decline was about 12%. Alan Greenspan posted the worst result — a 33% drop, while Ben Bernanke had the best, at just 2%. Under Jerome Powell, the first 90 days brought a 7% decline, and under Janet Yellen, 4%. No new Fed chair has managed to avoid this pattern, and now the 90-day countdown begins for Warsh.
Oil Collapse: The Iran Factor and Commodity Risks
Additional pressure comes from the sharp drop in oil. Brent has plummeted by about 15% and fallen below $78 per barrel. This marks the fifth consecutive losing session and the longest decline period in 2026, as well as the lowest level since early March. The reason is the return of Iranian oil to the global market: tankers carrying over 2 million barrels are already leaving the Strait of Hormuz following a deal between the U.S. and Iran.
Bloomberg Intelligence strategist Mike McGlone warns that oil, gold, and copper could end up in a losing position relative to U.S. stocks. In his view, stock market volatility remains subdued amid growing risks in commodity assets, and the boom in initial public offerings (including SpaceX) could be a sign of a market peak — similar to how Bitcoin ETFs served as such a signal in 2024.
My Expert Assessment
The convergence of three factors — the historical pattern of decline with a change in Fed chair, the oil collapse, and frozen rate expectations — creates an extremely volatile mix for markets. Warsh faces not just a routine meeting, but the task of setting the tone for the second half of the year. If he fails to convince the market of his independence and ability to manage inflation without harsh rhetoric, we could see an accelerated correction affecting not only the stock market but also the cryptocurrency market. Investors should prepare for heightened volatility over the next 90 days.