The Federal Reserve released its semi-annual
Monetary Policy Report
on Tuesday morning ahead of Fed Chair Janet Yellen's two-day
meeting with Congress.
In the report, the Fed discussed the recent all-time highs in
the stock market but stated that
"valuation measures for the overall market... were generally at
levels not far above their historical averages."
However, the central bank did make special mention of two
"[V]aluation metrics in some sectors do appear substantially
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."
Later in the report, the Fed went on to say that
"[e]quity valuations of smaller firms as well as social media
and biotechnology firms appear to be stretched, with ratios of
prices to forward earnings remaining high relative to historical
Global X Social Media Index ETF (SOCL)
iShares Nasdaq Biotechnology ETF (IBB)
were both down more than -2% after the report was released, but
both ETFs have rebounded a bit since then.
These comments are reminiscent of Alan Greenspan's famous
"irrational exuberance" speech in late 1996
(of course, the bubble inflated even higher as the bull market ran
for more than three years after this speech).
So what do you make of the Fed specifically calling out
valuations in the biotech and social media industries
Chime in below!
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ISHARES NDQ BIO (IBB): ETF Research Reports
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