Ed Yardeni Draws Parallels To Jerome Powell’s Equity Remarks With Alan Greenspan’s ‘Irrelational Exuberance’ Comments: Report

Economist Ed Yardeni, president of Yardeni Research, on Wednesday reportedly drew parallels to Federal Reserve Chair Jerome Powell’s remarks on equity prices being “fairly highly valued” with former Fed Chair Alan Greenspan’s “irrational exuberance” comments in 1996.

According to a report by CNBC, while Yardeni agreed with Powell’s comments about the stock market, the Fed Chair’s remarks about financial stability triggered his contrary instincts.

“Financial crises tend to be Black Swans, i.e., events that occur unexpectedly, especially when irrational exuberance is widespread and intensifying,” Yardeni said, according to the report.

“By many measures, for example, equity prices are fairly highly valued,” Powell said on Tuesday while speaking at an event in Rhode Island. However, he added that this is still “not a time of elevated financial stability risks.”

Powell also cautioned that the near-term risks to inflation are tilted to the upside, while risks to employment are tilted to the downside. “Two-sided risks mean that there is no risk-free path,” he said.

According to the report, Yardeni said Powell’s comments about the equity markets reminded him of Greenspan’s famous remarks in 1996: “How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions?”

Yardeni added that the weekly S&P 500 forward earnings per share (EPS) has been rising at a faster clip over the past few weeks. He added that this suggests that the third-quarter (Q3) earnings will rise to another record high, the report said.

Meanwhile, U.S. equities edged lower in Wednesday’s opening trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down 0.05%, while the Invesco QQQ Trust (QQQ) fell 0.06%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bullish’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was down 0.22% at the time of writing.

Also See: Jerome Powell Sees ‘Challenging Situation’ Ahead, Says There Is No Risk-Free Path

For updates and corrections, email newsroom[at]stocktwits[dot]com.

Share

·

Add us on