"The minutes released Wednesday from the Fed's policy meeting last month revealed other risks that drew more concern, including stock prices. "The staff judged that asset valuation pressures were elevated," the Fed said. "Price-to-earnings ratios for public equities stood at the upper end of their historical distribution, reflecting, in part, expectations of strong earnings growth for technology firms and elevated risk appetite among investors.""
"Corporate debt has grown in the past few years, especially among publicly traded companies with investment-grade ratings, the minutes said. "The financing of AI investment will likely entail higher debt issuance going forward, but low debt loads at most technology firms and muted aggregate debt growth in recent years suggest firms have the capacity to accommodate such growth," it added."
Staff economists at the Federal Reserve judged asset valuation pressures elevated and noted price-to-earnings ratios for public equities sit at the upper end of historical distributions, reflecting expectations of strong tech earnings and elevated investor risk appetite. By contrast, vulnerabilities from nonfinancial businesses were characterized as moderate. Corporate debt grew in recent years, especially among publicly traded investment-grade firms. Financing for AI investment will likely drive higher debt issuance, but low debt loads at most technology firms and muted aggregate debt growth suggest firms can accommodate the increase. Tech giants have tapped bond markets heavily, including record issuance and rare 100-year bonds.
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