Gen Zers are no doubt baffled by such recent headlines as “Fed Chair Powell just had his ‘irrational exuberance’ moment, Ed Yardeni says,” and “Did Jerome Powell Just Say ‘Irrational Exuberance’?” Those headlines refer to a long-ago event involving a previous Fed chair, dizzyingly high stock prices, and an eventual market crash. But beware: Some market soothsayers misinterpret that earlier episode, and getting it wrong could misguide today’s investors.
The headlines were sparked by a Powell appearance where he was asked, after his speech, if today’s record-high stock prices affect Fed policy. He answered, “We do monitor that, but we’re not targeting any level of prices for particular financial assets. We don’t have a view that we know what the right price of any particular financial asset is.” It was classic circumspect Fed talk. Then he added, “We do look at overall financial conditions,” and he went further to note, “For example, equity prices are fairly highly valued.”
