In the most interesting exchange during Janet Yellen’s final news conference, CNBC’s seemingly flustered Steve Liesman asked Janet Yelen a question which in other times would have led to his loss of FOMC access privileges: “Every day it seems the stock market goes up triple digits on the Dow Jones: is it now, or will it soon become a worry for the central bank that valuations are this high?”
Yellen’s response was predictable, colorfully so in fact.
Of course, the stock market has gone up a great deal this year. And we have in recent months characterized the general level of asset valuations as elevated. What that reflects is simply the assessment that looking at price-earnings ratios and comparable metrics for other assets other than equities, we see ratios that are in the high end of historical ranges. And so that’s worth pointing out. But economists are not great at knowing what appropriate valuations are, we don’t have the terrific record. And the fact that those valuations are high doesn’t mean that they’re necessarily overvalued.
This post was published at Zero Hedge on Dec 14, 2017.