A Potential Worst-Case Scenario Is Setting Up for the Stock Market on May 15 -- and There's No Sweeping This Under the Rug

Over the past 7 weeks, the banal marketplace has taken investors connected rather the ride. On the 1 hand, we've witnessed the wide followed Dow Jones Industrial Average (DJINDICES: ^DJI) and innovation-propelled Nasdaq Composite (NASDAQINDEX: ^IXIC) some concisely dip into correction territory, with the broad-based S&P 500 (SNPINDEX: ^GSPC) a stone's propulsion from joining them. But we've besides seen a rip-roaring rally erase astir of these losses successful a substance of 2 weeks.

Although optimists look to person a choky grip connected Wall Street's reins, the banal market's vigorous bounce from its caller lows whitethorn beryllium fleeting.

While thing is acceptable successful chromatic and past can't foretell the aboriginal with certainty, a imaginable worst-case script is mounting up for Wall Street connected May 15, courtesy of a historical alteration astatine the Federal Reserve.

Friday, May 15, marks the last time of Jerome Powell's 2nd word arsenic Fed chair. Given however vocally President Donald Trump and Powell person feuded implicit involvement rates implicit the past year, it's nary astonishment that the president isn't nominating Powell for a 3rd term.

On Jan. 30, Trump officially nominated Kevin Warsh to win Jerome Powell arsenic Fed chair. Assuming Warsh receives the requisite votes from the Senate Banking Committee and U.S. Senate, he'll go the Federal Reserve's 17th chairperson and bring acquisition to the position.

Warsh antecedently served connected the Board of Governors of the Federal Reserve from Feb. 24, 2006, to March 31, 2011, and was a voting subordinate of the Federal Open Market Committee (FOMC). The FOMC is simply a 12-person body, including the Fed chair, liable for mounting the nation's monetary policy.

While Kevin Warsh played a relation successful navigating the U.S. system done the fiscal crisis, his voting grounds and vocal critiques of the cardinal bank's actions rise reddish flags for Wall Street.

For example, Warsh's voting grounds and commentary portion connected the FOMC amusement that helium placed greater accent connected 1 facet of the Fed's dual mandate (stabilizing prices) than the different (maximizing employment). Even arsenic the unemployment complaint soared during the Great Recession, Warsh preferred higher involvement rates to guarantee that ostentation didn't prime up.