With the power to print money, raise and lower interest rates, and even facilitate massive bailouts, the U.S. Federal Reserve may be the single institution with the most power over the U.S. economy and stock market.
So which chairs of the Federal Reserve have been the best for the stock market?
Below is a look at every Federal Reserve Board chair since the central bank’s inception in 1914.
Historians and curious investors alike will look at stock market returns by Fed chair, along with inflation data and changes in interest rates and unemployment rates, when attempting to analyze and rank the best and worst Federal Reserve chairs in history.
Before going through all chairs chronologically, let’s take a look at stock market returns, annualized and inflation-adjusted, by Fed chair. Return data use the Dow Jones Industrial Average as the default stock market index.
Here are the best Fed chairs for the stock market (by annualized, inflation-adjusted returns):
- Daniel R. Crissinger (1923-1927): 17.2%
- Janet Yellen (2014-2018): 11.9%
- Paul Volcker (1979-1987): 9.3%
- Roy A. Young (1927-1930): 8.6%
- Charles Sumner Hamlin (1914-1916): 8.5%
- Thomas B. McCabe (1948-1951): 8.3%
- Alan Greenspan (1987-2006): 4.7%
- Jerome Powell (2018- ): 4.4%
- Eugene Robert Black (1933-1934): 4%
- William M. Martin (1951-1970): 3.9%
- Ben Bernanke (2006-2014): 2.5%
- Marriner S. Eccles (1934-1948): 0%
- G. William Miller (1978-1979): -1.8%
- William P.G. Harding (1916-1922): -5.6%
- Arthur F. Burns (1970-1978): -5.6%
- Eugene Meyer (1930-1933): -26.1%
Now, for more context, here’s a look at each Fed chair chronologically, and a few issues each dealt with during their tenure.
Charles Sumner Hamlin (1914-1916). The first leader of the central bank, Hamlin came to power just weeks after the beginning of World War I. Stock market returns under Hamlin were better than average, clocking in at an annualized rate of 12.3%.
However, inflation began to tick up under Hamlin’s watch, rising from 3% to 7.9% by the end of his short two-year term.
William P.G. Harding (1916-1922). Inflation would prove to be a real problem for Hamlin’s successor, too, as wartime spending contributed to soaring prices. In fact, the rises in the Consumer Price Index (CPI) peaked in the very month World War I concluded, with inflation clocking in at nearly 21% in November 1918.
Though overseeing a very difficult period, some economists, including Milton Friedman, blame Harding and the Fed’s decision to quickly raise rates for what turned into the opposite problem: rapid deflation and a severe recession in 1920-21.
By the end of Harding’s reign, consumer prices were falling by 6.2% annually.
Harding was one of the worst Federal Reserve chairs by stock market performance, with investors earning, nominally speaking, 1.2% annually – a return that was much more miserable considering cumulative inflation was 52% between 1916 and 1922. Factoring in inflation, real stock market returns under Harding were negative 5.6% annually.
Daniel R. Crissinger (1923-1927). Crissinger is the Fed chairman with the best stock market returns ever (on an annualized basis). The Dow Jones Industrial Average more than doubled in roughly four and a half years under Crissinger during the famous Roaring ’20s.
The 104% return amounted to annualized gains of 17.7% annually, while extremely low inflation – the CPI rose just 2% percent in 52 months – encouraged a “risk-on” attitude in markets and meant that real stock market returns under Crissinger were also record-setting, at 17.2% annually.
An important caveat, however, is that there was a relatively large gap (nine months) between Harding’s departure and Crissinger’s debut, during which the deflation crisis and economic downturn largely disappeared.
Roy A. Young (1927-1930). Young wasn’t quite as lucky. Although stocks continued their rapid upward trajectory for most of Young’s three-year chairmanship, his last year saw the beginnings of the Great Depression.
Even after the panic of 1929 and margin-induced mass selling, investors saw roughly 7% annualized returns under Young. Due to another episode of deflation, real returns were even higher (8.6% annually) as the dollar strengthened.
Workers, however, began to experience the onset of a decade-long struggle; the unemployment rate as Young stepped down was 8.9%, more than double the 4.1% rate in the U.S. three years earlier.
Eugene Meyer (1930-1933). When Meyer took the reins, it was clear that the U.S. was plunging into the depths of an epic economic crisis. Just how deep it would be, however, most Americans likely could not fathom.
In the roughly two and a half years that Meyer chaired the Fed, the stock market was absolutely crippled; the Dow lost 66% of its value. From its peak in 1929 to Meyer’s last day as chair, the Dow fell from 380 points to just 80 points, a plunge of roughly 80%.
It would take until 1954 – a quarter century later – for the blue-chip index to again reach its 1929 peak.
The central bank was put in an almost impossible position, but regardless, the stock market’s average annual decline of more than 33% under Meyer is by far the worst of any Fed chair in history, as is the annualized inflation-adjusted return of negative 26.1%. Unemployment nearly tripled under his watch, soaring from 8.9% to 24.9%, and deflation continued spiraling out of control, doubling from 4% in 1930 to 8% in 1933.
Eugene Robert Black (1933-1934). It’s often forgotten that there was a reprieve from the turmoil on Wall Street between 1932 and 1937. After a distinguished period as governor of the Atlanta Federal Reserve, during which Black was one of just two Fed governors to push for major open-market security purchases, Black oversaw the early stages of the mid-Depression Wall Street comeback.
Stocks actually gained 11% in Black’s 16-month tenure.
Black attempted to boost liquidity among America’s cash-starved financial institutions by slashing rates on loans the Fed made to banks. Deflation also disappeared under Black, who passed away three months after stepping down.
Had he been healthier, Black may have gone down as one of the best Federal Reserve chairmen of all time.
Marriner S. Eccles (1934-1948). The next Fed chair would serve a substantially longer term, serving for more than 13 years and seeing the country through the slow but gradual emergence from the Great Depression and the tumult of World War II.
Inflation-adjusted returns for the Dow were almost exactly zero over this time, as stocks rose 74% and so did the consumer price index. While investors weren’t greatly rewarded during this period, Americans as a whole were far better off at the end of Eccles’ term, with the unemployment rate falling from 21.7% to 3.8%.
Eccles was a U.S. delegate to the Bretton Woods Conference in 1944, which established fixed exchange rates and established the International Monetary Fund and World Bank. During World War II, Eccles’ Fed agreed to keep interest rates low to help finance the war effort.
Thomas B. McCabe (1948-1951). McCabe boasts the fifth-best stock market returns of any Fed chair, with annualized gains of 11.2%. The economic recovery would start turning into a legitimate boom under McCabe, as Americans returning from war returned to school and the workforce, giving a huge jolt to domestic productivity.
The beginning of the postwar expansion period saw unemployment of just 3.1% by the time McCabe’s term was over.
William M. Martin (1951-1970). President Harry Truman appointed both McCabe and Martin, who would go on to become the single longest-serving Fed chair ever.
The Dow more than tripled under Martin’s watch, but due to his unusually long term, that merely amounted to returns of 6% annually (3.9% annually when inflation-adjusted).
Serving through five presidencies, Martin is known for his tight money policies and for resisting political pressure from Washington, believing that the central bank should not bow to partisan whims. His decision to raise rates in late 1965 famously sparked a physical confrontation from President Lyndon B. Johnson, who allegedly shoved Martin up against the wall, saying, “Martin, my boys are dying in Vietnam, and you won’t print the money I need.”
Arthur F. Burns (1970-1978). The White House’s stubborn desire to exert influence over the Fed didn’t end with LBJ. President Richard Nixon appointed Burns to the top position at the Fed in 1970 in a quid pro quo – Burns vowed to provide easy money policies for Nixon to help him win re-election in 1972.
This agreement would help doom investors to a lost decade in the 1970s, which were characterized by extreme inflation, two energy crises, the devaluation of the dollar and Nixon’s failed wage and price controls.
Stocks rose a total of just 3% in Burns’ eight years, but since cumulative inflation clocked in above 60%, inflation-adjusted real returns under Burns were horrendous: negative 5.6% annually. That makes Burns one of the worst Fed chairs for stocks ever, with only Meyer’s chairmanship at the onset of the Great Depression seeing worse inflation-adjusted returns.
G. William Miller (1978-1979). President Jimmy Carter was frustrated with Burns’ failed attempts to combat inflation, and sought instead a Fed chair who would focus more on attracting investments to the U.S. and fighting unemployment.
Miller was Carter’s pick, and though he lasted just 17 months, Carter got what he asked for: Unemployment fell slightly, from 6.3% to 6%, and the inflation Carter preferred the Fed de-prioritize nearly doubled from 6.6% to 11.8%.
Miller left the Board of Governors to serve as secretary of the treasury for Carter, a position he held until 1981. He is one of only two people in American history to serve as Fed chair and treasury secretary; Janet Yellen would become the second more than 40 years later.
Paul Volcker (1979-1987). The next Fed chairman inherited a very difficult economy: By 1979 the U.S. was experiencing “stagflation” – high inflation, low growth and high unemployment – and there was no end in sight. Volcker fought inflation head-on with tight money policies and practically usurious interest rates.
The effective federal funds rate soared to a monthly high of 19.1% in 1981, and rates have never been as high since.
Though controversial, Volcker’s aggressive policies started working, and by his departure in 1987 he’d both reduced interest rates from 10.94% to 6.73% and, more importantly, tamed inflation (which ended at 4.3%, down from 11.8%).
Volcker’s tenure saw the second-highest annual returns (15.4%) in the stock market of any Fed chair; even his inflation-adjusted returns (9.3% annually) are the second-best ever, with only Crissinger’s four-year term in the Roaring ’20s scoring better adjusted returns for investors.
Alan Greenspan (1987-2006). Next up is Alan Greenspan, a man whose words were, for many years, considered by Wall Street traders and Capitol Hill politicians alike as gospel.
“Greenspan was known as ‘The Maestro’ during his tenure as Fed chair given the steady economic growth and stock bull market,” said Greg McBride, chief financial analyst for Bankrate.com, in 2018.
Greenspan nearly became the longest-serving Fed chairman, staying for 18-and-a-half years; William Martin’s tenure was just four months longer.
The economy was saddled with just two minor recessions under Greenspan’s watch – in 1990-91 and in 2001 – but those were easily overshadowed by the 1990s internet boom. Greenspan oversaw the greatest cumulative return of any Fed chair ever, as the Dow more than quadrupled during his watch.
His reputation would take a hit in subsequent years as laissez-faire lending conditions during his tenure helped spark the housing bubble and subsequently the Great Recession.
Ben Bernanke (2006-2014). Appointed by President George W. Bush in 2006, Bernanke had big shoes to fill and soon, a historic crisis to confront. Little did he know it, but Bernanke – an academic, historian, professor and economist whose area of expertise was the Great Depression – had been training all his life for the vitally important role he found himself in during the financial crisis of 2008-2009.
Extraordinary times call for extraordinary measures, and Bernanke oversaw the central bank through three rounds of “quantitative easing” as it expanded its balance sheet to record levels, buying Treasurys, equities and other troubled assets by the trillions, quickly injecting liquidity into the U.S. economy in an attempt to prevent another Great Depression.
Deficit spending ballooned, and near-zero interest rates combined with government bailouts for “too big to fail” institutions created political uproar and difficult environments for many savers and average Americans.
Bernanke’s policies undoubtedly helped America emerge from recession more quickly than it could’ve otherwise. What would have happened without the Fed’s sizeable intervention no one will ever know. Love him or hate him, Ben Bernanke will go down as one of the most important Federal Reserve chairs of all time.
Janet Yellen (2014-2018). Appointed by President Barack Obama in 2014, Yellen also had big shoes to fill. On top of that, Yellen became the first female chair of the Federal Reserve.
Yellen undertook the unenviable task of trying to “normalize” the Fed’s balance sheet, all while paying careful attention to how doing so would affect the Fed’s two mandates: keeping inflation and unemployment in check.
The Fed began “quantitative tightening” in late 2017, shrinking the balance sheet by $20 billion a month, then ramping up to $50 billion a month by late 2018.
Yellen is one of the Fed chairs with the best stock market returns ever, with the Dow gaining 13.5% annually during her four years. Inflation-adjusted annualized returns under Yellen are lower, at 11.9%, but still very impressive, with adjusted annualized returns the second-best in history.
Inflation and interest rates remained quite low for most of her term and the unemployment rate fell from 6.7% to 4.1%.
Jerome Powell (2018-present). President Donald Trump appointed a new Fed chair, Jerome “Jay” Powell, who entered the job shortly before the stock market set a new record for the longest bull market of all time.
With the bull market already long in the tooth when Powell assumed office, it was unlikely that he wouldn’t have to oversee a recession during his tenure. And boy, did he.
When the pandemic hit like a ton of bricks in 2020, bringing the 11-year bull market to an abrupt end, the Federal Reserve had to take extraordinary measures, slashing rates and injecting more than $2 trillion into the economy in about six weeks in the early days of the COVID-19 outbreak.
It’s still early to reflect on legacy, but the Federal Reserve’s aggressive response to stave off severe recession during unprecedented economic shutdowns may have staved off an economic fallout that would have exceeded the Great Recession. Between February 2020 and April 2020, the unemployment rate rocketed from 3.5% to 14.7%.
After a V-shaped recovery in 2021, Powell has been confronted with still more delicate economic challenges, including soaring inflation sparked in part by supply-chain shortages, a pandemic that won’t end and rapidly shifting geopolitical realities following Russia’s unprovoked invasion of Ukraine in February 2022.
Stock market returns under Powell are modest, averaging 7.8% annually, or 4.4% annually when adjusted for inflation. With Powell’s term not yet over, and inflation both high and still rising, much is left to be written about Powell’s duration as the head of the central bank. Data for Powell’s reign is current through March 22, 2022.