Is Janet Yellen stirring the bullish investor within you? The nominee for Federal Reserve chairman delivered remarks and answered questions from U.S. lawmakers on Thursday, shedding additional light on what sort of policies she'll pursue.
And by the sounds of things, she's not likely to do anything to upset the stock market. She said that the country's unemployment rate is too high, inflation is too low and economic performance is below potential – all of which requires the ongoing help of the central bank.
Of course, the Fed's help has been feeding a remarkable bull market in stocks: The S&P 500 is up 24 per cent this year, to record highs, putting it on track for one of its best full-year gains in a decade. But Ms. Yellen doesn't sound too concerned about this response. She rejected the idea that the market is in the midst of yet another asset bubble – arguing that while "stock prices are up robustly," they do not suggest "bubble-like conditions."
The S&P 500 is loving it: In afternoon trading, it gained 6 points to 1788, marking another record high even as Wal-Mart Stores Inc. and Cisco Systems Inc. delivered dismal financial forecasts that suggest a weak economy. The reason is likely because investors are pushing back their tapering forecasts, or when the Fed starts reducing its monthly bond purchasing program known as quantitative easing or QE.
However, some observers didn't see anything particularly noteworthy in Ms. Yellen's remarks.
Paul Ashworth, Capital Economics: "Whether the Fed begins to taper its asset purchases at its December meeting or sometime early next year, be it in January or March, is still open to question. October's labour market data were certainly strong enough to warrant an earlier move, particularly alongside the news of an acceleration in GDP growth in the third quarter. But given all the recent flip-flopping we're unsure of exactly what would be enough to convince the Fed to act at any particular meeting."
Ian Shepherdson, Pantheon Macroeconomics: "Janet Yellen's responses in the Senate Q&A session were as dovish as we expected, but no more. Dr. Yellen expressed no worries about upside inflation risks, majoring instead on the damage done by persistent high unemployment and downplaying the risks that continued QE will generate asset bubbles."
David Berman