This Week in Review | UK Politics, Fed Developments, IPOs (May 22, 2026)
This Week in Review covers three major developments: UK political instability following Labour's local election losses and a cabinet resignation, the swearing-in of Kevin Warsh as the new Federal Reserve chair replacing Jerome Powell, and a cautionary analysis of the current IPO wave. Fisher Investments analysts argue that while each development creates short-term uncertainty, none is necessarily negative for long-term investors.
Summary
The episode opens with UK political turmoil, noting that Prime Minister Keir Starmer faces mounting pressure after Labour suffered historic losses in local council elections. The situation escalated with Health Secretary Wes Streeting's resignation and announcement that he would challenge Starmer for the Labour leadership. The analysts explain that a formal leadership contest would involve a postal ballot among party members lasting several weeks, and that a Starmer resignation would likely produce policy gridlock until a new government is formed. However, they argue this gridlock could actually reduce legislative uncertainty, and that frequent leadership turnover in recent British politics limits the surprise factor for markets — suggesting falling uncertainty could eventually become a tailwind.
The second segment covers the Federal Reserve, reporting that Kevin Warsh was sworn in as Fed chair on the day of recording, succeeding Jerome Powell, who will remain on the board as a regular voting member. The analysts acknowledge concerns that Trump's expectation of rate cuts from Warsh raises fears of political interference in monetary policy. However, they push back on the notion that Fed leadership changes are automatically negative, citing historical data showing positive average and median stock returns in both the six and twelve months following a new Fed chair's start. They also emphasize that monetary policy is set collectively by the 12-member Federal Open Market Committee, limiting any single chair's near-term influence.
The final segment addresses the resurgence of IPO activity, with several high-profile firms reportedly eyeing public debuts. The analysts caution investors against IPO enthusiasm, noting that from 1980 through 2024, newly public companies underperformed similarly-sized peers by an average of 3.3% annually over their first five years. They attribute this to the tendency for companies to go public when market conditions favor issuers — typically later in a market cycle when optimism and valuations are already elevated. They apply this lens to current technology and AI-related IPO candidates, suggesting expectations may already be stretched relative to fundamentals. The segment closes with the observation that how the market receives major IPOs could serve as a useful sentiment indicator for where we are in the broader market cycle.
Key Insights
- Fisher Investments analysts argue that a potential Starmer resignation and resulting policy gridlock could actually reduce legislative uncertainty rather than increase it, framing political paralysis as a possible near-term positive for markets.
- The analysts cite historical data showing that average and median stock returns have been positive in both the 6 and 12 months following the start of a new Federal Reserve chair's term, countering the narrative that leadership changes are inherently negative for markets.
- Fisher Investments emphasizes that the Fed chair does not set monetary policy unilaterally — the 12-member Federal Open Market Committee makes those decisions collectively — which limits the near-term impact of a chair transition on the trajectory of monetary policy.
- The analysts report that from 1980 through 2024, newly public companies underperformed similarly-sized peers by an average of 3.3% annually over their first five years, arguing that a small number of standout IPOs obscure a much larger group of underperformers.
- Fisher Investments argues that many IPOs come to market when conditions favor the issuing company rather than investors, and that this dynamic appears to be at play with current technology and AI-related firms where expectations may already be elevated relative to reality.
Topics
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