Yellen Cites ‘potential dangers’ in Valuations of U.S. Stocks

Federal Reserve Chair Janet Yellen on Wednesday said high equity valuations could pose potential dangers but that stability risks across the U.S. financial system remained in check.  “I would highlight that equity market valuations at this point generally are quite high,” Yellen said. “There are potential dangers there.”

Yellen’s view on the run-up in stocks was an answer to questions from International Monetary Fund Managing Director Christine Lagarde, who joined the Fed chief for the opening session of the “Finance and Society” conference here.  “We’ve also seen the compression of spreads on high-yield debt, which certainly looks like a reach for yield type of behavior,” Yellen said.

U.S. stocks were trading lower following the comments, building on earlier declines triggered by weak private job data.  Another potential trouble spot that Yellen pointed out was low long-term interest rates, which could spike as the Fed normalizes its policy, causing disruption across the financial system.

Reuters

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.