"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."
"Old timers immediately saw the incident's parallel with a speech Fed Chair Alan Greenspan gave in the 1990s. He mentioned the phrase "irrational exuberance"-in an abstract, what-if way-as a force that might push stock prices too high. No one heard it that way, however. His real message seemed clear: The most influential person in the world's largest economy thought stock prices were too high."
Jerome Powell said the Fed monitors financial conditions but does not target specific asset prices, noting that equity prices are fairly highly valued. Financial media quickly amplified the remark, prompting speculation about Fed-driven market intervention or predictive insight. Older memories of Alan Greenspan's 'irrational exuberance' comment in the 1990s shaped responses, since that remark was interpreted as signaling overvalued stocks prior to the 2000 crash. Market watchers risk misreading cautious Fed language as explicit valuation calls. Conflating guarded Fed commentary with definitive market-timing signals can misguide investors and propagate incorrect narratives about causal policy-market links.
Read at Fortune
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