Fed Chair Janet Yellen says the current high stock market valuation does not mean overvaluation.

Jonah Whanau

2017-12-11 08:42:00 Mon ET

Fed Chair Janet Yellen says the current high stock market valuation does not mean overvaluation. A stock market quick fire sale would pose minimal risk to the economy and the macroprudential system. During her final Federal Reserve press conference, Yellen says the prime metrics such as the forward aggregate stock market P/E and P/B ratios are on the high end of historical ranges when the Fed warns that asset prices appear to be high. In fact, the low-interest-rate economic environment is supportive of higher stock prices and home prices. In this context, there is a reasonable balance of financial risks that manifest in the form of less worrisome levels of both bank leverage and private credit growth.

A recent Project Syndicate op-ed article sketches the key reasons for U.S. stock market rational exuberance such as better economic growth with low inflation, monetary and fiscal stimulus, full employment, and higher net income in both the household and corporate sectors. As the world economy skyrockets on all cylinders in America, Europe, and China with robust economic growth since the global financial crisis of 2008-2009, U.S. inflation remains below the 2% target, unemployment is less than 5%, and monetary policy normalization continues at a moderate pace. Federal Reserve shrinks its balance sheet post-QE, finishes the full course of 3 interest rate hikes in 2017, and then expects another around of 3 to 4 rate increases in 2018. The current 7-year uptick in U.S. corporate net income typically precedes the European and Asian counterparts in subsequent episodes. All of these reasons help justify the current Trump stock market rally as rational exuberance and optimism.

 


If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.

Blog+More

Warren Buffett approves Berkshire Hathaway to implement new meaningful stock repurchases.

Dan Rochefort

2018-11-15 12:35:00 Thursday ET

Warren Buffett approves Berkshire Hathaway to implement new meaningful stock repurchases.

Warren Buffett approves Berkshire Hathaway to implement new meaningful stock repurchases. Buffett sends a positive signal to the stock market with the Berks

+See More

President Trump sounds smart when he comes up with a fresh plan to retire $15 trillion national debt.

Peter Prince

2018-08-07 07:33:00 Tuesday ET

President Trump sounds smart when he comes up with a fresh plan to retire $15 trillion national debt.

President Trump sounds smart when he comes up with a fresh plan to retire $15 trillion national debt. This plan entails taxing American consumers and produc

+See More

President Trump remains optimistic about the Sino-American trade war resolution.

Monica McNeil

2019-02-05 10:32:00 Tuesday ET

President Trump remains optimistic about the Sino-American trade war resolution.

President Trump remains optimistic about the Sino-American trade war resolution of both trade deficit eradication and tech transfer enforcement. Trump now s

+See More

Corporate investment insights from mergers and acquisitions

Joseph Corr

2022-10-25 11:31:00 Tuesday ET

Corporate investment insights from mergers and acquisitions

Corporate investment insights from mergers and acquisitions Relative market misvaluation between the bidder and target firms drives most waves of mergers

+See More

Neoliberal public choice continues to spin national taxation and several other forms of government intervention.

Peter Prince

2019-01-07 18:42:00 Monday ET

Neoliberal public choice continues to spin national taxation and several other forms of government intervention.

Neoliberal public choice continues to spin national taxation and several other forms of government intervention. The key post-crisis consensus focuses on go

+See More

The current Trump stock market rally has been impressive from November 2016 to October 2017.

John Fourier

2017-10-09 09:34:00 Monday ET

The current Trump stock market rally has been impressive from November 2016 to October 2017.

The current Trump stock market rally has been impressive from November 2016 to October 2017. S&P 500 has risen by 21.1% since the 2016 presidential elec

+See More