Morning Report 16 July 2014
Last night Janet Yellen, the U.S. Federal Reserve Chair, clearly challenged the levels of areas in the equity market with a speech that included the below phrase:
“Valuation metrics in some sectors do appear substantially stretched – particularly those for smaller firms in the social media and biotechnology industries, despite a notable downturn in equity prices for such firms early in the year.”
The market response can be interpreted in a number of different ways that I find both interesting and insightful:
The markets sell off was both small and concentrated in the Tech space, an overall positive response.
The Fed’s basically zero short-term interest rate is enticing investors to seek out returns from higher-risk securities that they are less familiar with, which is scary, medium to longer term.
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