Yesterday, Fed Chair Janet Yellen presented the Fed’s semi-annual Monetary Policy Report to the Senate Banking Committee. While the accompanying testimonies of Fed chairs always make headlines, the report is rarely even read. Not so the latest one, which provided the following investment advice: “Equity valuations of smaller firms as well as social media and biotechnology firms appear to be stretched, with ratios of prices to forward earnings remaining high relative to historical norms.” In other words, sell them.
That unnerved stock investors despite the following reassurance in the report about the overall market: “However, valuation measures for the overall market in early July were generally at levels not far above their historical averages, suggesting that, in aggregate, investors are not excessively optimistic regarding equities.”
Yellen was also reassuringly dovish, stating: “Although the economy continues to improve, the recovery is not yet complete.” Despite all the recent strength in lots of labor market indicators, she claimed that “significant slack remains in labor markets.” She said that this is “corroborated by the continued slow pace of growth in most measures of hourly compensation.” In the past, she indicated that she would like to see wage inflation rise from 2% currently to 3%-4%.
The 7/21 issue of The New Yorker includes a lengthy article about Yellen that’s worth reading. It confirms that she is an impassioned liberal: “Yellen is notable not only for being the first female Fed chair but also for being the most liberal since Marriner Eccles, who held the job during the Roosevelt and Truman Administrations. Ordinarily, the Fed’s role is to engender a sense of calm in the eternally jittery financial markets, not to crusade against urban poverty.”
Yellen is from the Fed, and here “to help American families who are struggling in the aftermath of the Great Recession.” She and her husband, who leans far to the left, have published a series of papers on why labor markets don’t automatically work to maintain full employment. The government can do the job better: "I come from an intellectual tradition where public policy is important, it can make a positive contribution, it’s our social obligation to do this. We can help to make the world a better place.”
That unnerved stock investors despite the following reassurance in the report about the overall market: “However, valuation measures for the overall market in early July were generally at levels not far above their historical averages, suggesting that, in aggregate, investors are not excessively optimistic regarding equities.”
Yellen was also reassuringly dovish, stating: “Although the economy continues to improve, the recovery is not yet complete.” Despite all the recent strength in lots of labor market indicators, she claimed that “significant slack remains in labor markets.” She said that this is “corroborated by the continued slow pace of growth in most measures of hourly compensation.” In the past, she indicated that she would like to see wage inflation rise from 2% currently to 3%-4%.
The 7/21 issue of The New Yorker includes a lengthy article about Yellen that’s worth reading. It confirms that she is an impassioned liberal: “Yellen is notable not only for being the first female Fed chair but also for being the most liberal since Marriner Eccles, who held the job during the Roosevelt and Truman Administrations. Ordinarily, the Fed’s role is to engender a sense of calm in the eternally jittery financial markets, not to crusade against urban poverty.”
Yellen is from the Fed, and here “to help American families who are struggling in the aftermath of the Great Recession.” She and her husband, who leans far to the left, have published a series of papers on why labor markets don’t automatically work to maintain full employment. The government can do the job better: "I come from an intellectual tradition where public policy is important, it can make a positive contribution, it’s our social obligation to do this. We can help to make the world a better place.”
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