News Column

ECONOMICS

July 20, 2014



Meet the latest share tipster: Janet Yellen. The chair of the US Federal Reserve appeared before Congress twice last week, and as well as unveiling the latest thinking on US interest rates - they may or may not go up sooner than expected - she managed to knock back a few share prices.

Alongside her Tuesday appearance, the Fed announced that "valuation metrics in some sectors do appear substantially stretched - particularly those for smaller firms in the social media and biotechnology industries".

Which translated as "sell tech shares" as far as the market was concerned, and the likes of Twitter and Facebook fell sharply. Never mind that those businesses hardly count as "smaller firms".

But there came another Yellen testimony on Wednesday, when she said the Fed did not have a target for equity values and instead looked at how they compared with historical performance. "In that sense, I am not seeing alarming warning signals," she said. Cue recovery (although with the Malaysian plane tragedy this did not last long).

Not exactly Alan Greenspan's comments about "irrational exuberance" Fed during the dotcom boom, which seemed to predict the subsequent crash. But enough to be going on with.

Captions:

Yellen: no alarming warning signals.



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Source: Observer (UK)


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