"U.S. Federal Reserve Chairman Jerome Powell gave a speech in Rhode Island yesterday and, afterwards, was asked whether the Fed was keeping an eye on the markets. His reply contained six words that investors didn't want to hear: "Equity prices are fairly highly valued." The S&P 500 lost 0.55% on the day. Markets in the U.K. and Europe are all down this morning. The picture is mixed: Asia largely had a good day and U.S. futures are marginally up, so it's not a tsunami."
"Powell said: "We do look at overall financial conditions, and we ask ourselves whether our policies are affecting financial conditions in a way that is what we're trying to achieve ... But you're right, by many measures, for example, equity prices are fairly highly valued." UBS's Paul Donovan interpreted it this way: "Powell apparently just wants investors' confidence to be somewhat less certain.""
Jerome Powell said equity prices are "fairly highly valued" after a speech in Rhode Island, prompting investor caution. The S&P 500 fell 0.55% while U.K. and European markets opened lower; Asia had a largely positive day and U.S. futures were marginally up. Investors worry that perceived overvaluation could imply "irrational exuberance" and raise the chance of Fed rate action to cool a bubble. UBS's Paul Donovan suggested Powell sought to reduce investor confidence. Tech stocks led losses as the Nasdaq fell nearly 1% amid skepticism over Nvidia's reported $100 billion OpenAI investment and questions about the sustainability of the AI boom.
Read at Fortune
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