New York Federal Reserve Chairman John Williams said Friday that high stock prices and other assets are justified in light of a growing economy and a low interest rate landscape.
With stocks rising in valuation ratings that have not been seen in decades, and as corporate bond yields plummet, the central bank official said he is not worried about current prices.
“Market participants and investors around the world are looking forward to this year and looking for an economy that we expect to have a fairly solid recovery and strong expansion over the next few years, which would support stronger valuations,” he said. Williams to Steve Liesman of CNBC interviewed “The Exchange.”
The main averages have managed to be based on the gains of 2020, despite some nervous volatility.
The Fed’s low-rate policy and continued asset buying are often cited as a driving force behind risky asset prices. Earlier in the day, the Fed’s half-yearly monetary policy report to Congress noted that “asset valuation pressures have returned to or exceeded pre-pandemic levels in most markets, including equity markets. , corporate bonds and residential real estate “.
Although Williams did not commit to a specific future course for the central bank, he indicated that the environment is likely to remain accommodative.
“I think the key drivers are optimism among investors for the U.S. economy and the global economy to have a stronger recovery and expansion, an expectation of low rates until the future,” he said. “Combined will provide you with high asset valuations.”
Williams also addressed the high levels of monetary and fiscal stimulus that have been provided during the Covid-19 pandemic. He said he does not care that policymakers do too much, despite an economy that seems to challenge previous projections for a slow start to 2021.
Treasury Secretary Janet Yellen, a former Fed chairman, told CNBC on Thursday that aggressive stimuli are still needed.
“Right now, the economy has many ways to go back to maximum employment and we have ways to go back to our 2% inflation target,” he said. “So I don’t really care if tax support is excessive or anything like that. Really, what I want to see is an economy that recovers as much as possible as soon as possible.”