Fed Chair & Mid-Terms
- Alex Potter, CFP®
- Jun 1
- 3 min read
Updated: Jul 1
Hard to believe it's June 1st! Hope everyone enjoyed Memorial Day weekend. My kids are as excited about summer as I am... maybe more.
This month I want to walk through two key events shaping 2026.
Interest Rates & Mid-Terms
A new Fed Chair. Kevin Warsh was sworn in as the 17th Chair of the Federal Reserve on May 22nd, replacing Jerome Powell after his term expired on May 15th. Powell led the Fed through COVID and the inflation surge that followed. He'll be remembered for calling inflation "transitory" in 2021 — a misread that delayed rate hikes and let the post-stimulus economy run hot.
The Fed eventually pushed rates to a peak of 5.25–5.50% from July 2023 through September 2024. Many of you remember that period — CD rates were attractive and money market yields hit memorable highs.
Powell began cutting in September 2024. Today the Fed funds rate sits at 3.50–3.75%. Here's the interesting part: as of today, markets see a rate hike as more likely than a cut by early 2027 (see image below).
Warsh is walking into a tough job. President Trump has been publicly pushing for rate cuts, but the war in Iran has driven oil sharply higher since late February, putting upward pressure on inflation. Cutting rates into that backdrop would be a hard sell.
The bond market is already responding. The 10-year Treasury hit a 2026 high of 4.67% on May 19th (see image below).
Expected Fed Funds Rate
(December 9th, 2026)
10-Year Treasury
(These rates are not set/fixed by the government, rather rates are determined by market participants. The Federal Reserve Board sets short term rates, not long term rates. )
Mid-Term Election
November is closer than it feels, and political ads will soon dominate the airwaves.
During mid-term election years, market returns have historically been muted compared to all other years. Returns tend to stay relatively flat through the spring and summer, then accelerate once election results are firm.
Months leading into November of mid-term years, volatility tends to remain elevated compared to non-election years. If we know this ahead of time, it can help investors stay grounded. As the next page will show, market performance tend to be relatively strong after mid-term elections.
The green line illustrates the average rate of one-year returns AFTER mid-term elections. Pretty fascinating!
The overall pattern we see is that markets tend to be volatile leading into mid-terms, volatility then drops, and one-year returns thereafter tend to be strong compared to non-election years.
**Investing is never guaranteed, and historical performance is no indication of future performance.
As the 2nd Half of 2026 Begins
The goal for long-term investors is to recognize short-term market behavior so we can prepare for what's ahead. In 2026, we know two things: there will be a Fed change and a mid-term election. Both carry risks already priced into the market — and both carry unknowns that aren't.
As many of you have heard me say before, sometimes the best thing to do is stick your head in the sand and stay patient. That single discipline has helped investors more than almost any other strategy.
If you have questions or concerns heading into the fall, please don’t hesitate to reach out.
Fed Chair Fact
A Fed Chair serves a 4-yr term, with no cap on reappointments. For perspective, Alan Greenspan served five terms, under four presidents.
Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. This communication is strictly intended for individuals residing in the states of MI, IN, OH. Cambridge and Foundation Wealth Management are not affiliated.
Comments