A little over a week ago Janet Yellen uttered the following words, “I would highlight that equity market valuations at this point generally are quite high.” What was she trying to convey? Here is one outlandish theory from Tom Hutchinson.
“Why is she talking about the market? Now Fed chairs are notorious for avoiding being clear about the direction of the market or their opinion evaluation. They go way out of their way to do that. When they deliberately talk about the market, there’s a reason for it. What I personally think is the reason here is that the Fed is not going to raise rates in June or maybe even September and she’s trying to talk down the market a little bit in anticipation of not raising rates.
My opinion is that if she was going to raise rates, why talk down the market? The rate hike would do that. The risks of not raising rates are that, you create a bubble. Too many people love the idea that rates aren’t going up and flood into the market and she wants to temper that a little bit and avoid overvaluation.”
So, let me get this straight. Janet Yellen does not want to raise rates and she is asking Mr.Market not to push higher? Perhaps. However, here is a scenario that makes a little bit more sense. At least to me. The FED will raise rates and Ms. Yellen is simply telling the market that it should get a little bit more serious about the upcoming rate hikes. Particularly, when you consider today’s bubble level valuations.
