Markets fell after Fed Chairman Jerome Powell warned that stocks are “highly valued.” U.S. stocks dropped, with tech leading losses on skepticism over Nvidia’s $100 billion OpenAI deal. Europe and U.K. markets opened lower.
U.S. Federal Reserve Chairman Jerome Powell gave a speech in Rhode Island yesterday and afterward 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 were all down this morning. The picture was mixed: Asia largely had a good day and U.S. futures are marginally up, so it’s not a tsunami.
Powell’s remarks weren’t controversial.
Everyone knows that most major indexes have hit record highs this year. But it is clear that investors are wary of any sign that the Fed thinks “irrational exuberance”—as former Fed chair Alan Greenspan once called it—has kicked in. That would be a point at which the Fed could be expected to start raising interest rates in order to pierce an economic bubble. And that would be bad for stocks.
