United States Federal Reserve Chair Janet Yellen’s observation this week that U.S. stock prices had become dear was immediately challenged. No more so than the two previous business cycles, countered RBC Capital’s Tom Porcelli, citing the average ratio of equity price to reported earnings. Many others were equally dismissive. The actual market reaction to the Fed chair’s comments was muted, suggesting most traders still think U.S. stocks are priced for profit.
Mr. Porcelli in a note to clients referenced Ms. Yellen’s July 2014 comments about the price of biotech stocks being stretched – stretched so much that they have gained more than 20 per cent since, he said snidely. Ms. Yellenalso warned about valuations in social media. That call doesn’t look so bad, as anyone who owns shares in Twitter Inc. and LinkedIn Corp. can attest.
Anyway, all this distracts from the bigger picture.
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