Well-known capital-markets strategist, Janet Yellen, is back. Janet is back on Capitol Hill for congressional testimony, to answer questions about leaked information, interest rates and market valuations. One of the world’s preeminent central banks made it a point to worry about the rising prices in commercial real estate. The Fed essentially is saying “valuation pressures in commercial real estate are rising as commercial property prices continue to increase rapidly”. The S&P 500 hit a high on May 21st before the Greece crisis, but is slowly rising back up again.
About a year ago in a report to congress, Yellen singles out two types of stocks, social media and biotech, stating that valuations in these momentum driven sectors were substantially over-stressed. While she was not too keen on social media stock, she did say biotech firms are still hot. Usually the Federal Reserve takes a hands-off approach to markets but the central bank just can’t ignore them. Ben Bernanke said in 2010 that rising stock prices would increase the “wealth effect,” the idea that if people feel wealthy they’ll spend more, which will spur the economy, which will result in more actual wealth. Only time will tell what happens to our stock market and economy.