Markets may be excited by the idea of a Federal Reserve led by Janet Yellen, but if history is any indication, stocks could be in for a rough patch as she begins her tenure. Over the past 25 years, a distinct and disturbing trend has emerged—one that has been deemed the "curse of the new Federal Reserve chair."
"Newly installed U.S. central bank heads since 1970 see S&P 500 returns that are, on average, negative over the first three years of their tenure," writes out ConvergEx's chief market strategist, Nicholas Colas, in a Wednesday note. "You could have safely sat out the first three years of Volcker, Greenspan, and Bernanke's respective tenures and made all/even more of the market's return in the remainder of their time on the job."
To be sure, the performance over the start of Chairman Paul Volcker's, Chairman Alan Greenspan's and Chairman Ben Bernanke's terms tells a decidedly gloomy story. On average, the S&P was flat over the first month of the last three Fed chairs' time in office, and dropped about 10 percent in the first three years.