Key insights
- The article draws a historical parallel between the 1987 stock market crash and the current market environment, citing the swearing-in of Kevin Warsh as Fed Chair at the White House, similar to Alan Greenspan's 1987 inauguration. With markets near all-time highs and stretched valuations, the author suggests a potential for a significant downturn, evoking concerns of a repeat of Black Monday. This historical analogy, combined with current market conditions, signals a bearish outlook.
Kevin Warsh was sworn in as the new Federal Reserve Chair on May 22, 2026. To say that there is some anxiety about what he might do in his new role is an understatement. However, there's one specific detail about Warsh's debut that gives some market historians the chills.
Typically, the swearing-in ceremonies for new Fed chairs are held relatively quietly at the Federal Reserve building. Warsh, though, was sworn in at the White House. The only other time the ceremony was conducted at the White House was on Aug. 11, 1987, when former President Ronald Reagan swore in Alan Greenspan. Roughly two months later, the Dow Jones Industrial Average (^DJI +0.45%) plummetted 22% on what became known as Black Monday. It was the worst one-day stock market crash in U.S. history.
Most students of market history probably aren't superstitious. But some are noticing some eerie parallels between now and 1987.
Greenspan took the helm at the Federal Reserve when the stock market was near its all-time high and valuations were stretched. His predecessor, Paul Volcker, had orchestrated an end to the soaring inflation of the 1970s and early 1980s. However, strong economic growth renewed inflationary concerns by 1987.
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Some were skeptical about Greenspan because of his political connections. They worried that he might be overly accommodating to the White House's objectives.
It's easy to see the parallels with today. The Dow Jones and S&P 500 (^GSPC +0.13%) are both near record highs. Valuations are frothy, with the S&P 500 Shiller CAPE (cyclically adjusted price-to-earnings) ratio at its second-highest level ever. The ratio's highest level, by the way, was in early 2000 -- shortly before the dot-com bubble burst.
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Inflation has declined significantly from its post-pandemic peak. However, high prices remain problematic. The University of Michigan's Consumer Sentiment Index is at the lowest level since the index was created in 1952. Consumers' top concern is the specter of rising inflation, especially with the Iran war keeping oil and gas prices elevated.
Like Greenspan, Warsh faces skepticism about his political loyalties. President Trump repeatedly criticizes Warsh's predecessor, Jerome Powell, for not aggressively cutting interest rates. Some view Warsh as a yes-man who will do whatever the president wants, thereby damaging the Federal Reserve's independence.
It would be silly to assume that the stock market will crash in the near term because of the similarities between Greenspan's early days as Fed Chair in 1987 and Warsh's debut today. However, stretched market valuations and rising inflation could understandably cause some trepidation among investors.
If history does repeat itself, though, there's some good news. The stock market quickly rebounded after "Black Monday" in 1987. By 1989, stocks were again setting record highs. Sell-offs always create opportunities for forward-thinking investors.