In response to Federal Reserve Chair Jerome Powell‘s recent remarks that stock prices appear “fairly highly valued,” Fundstrat’s Head of Research, Tom Lee, offered a swift counter-narrative, urging investors not to interpret the comments as a warning sign.
Lee Cautions Against Powell’s Language
Lee contextualized Powell’s statement, suggesting that such cautious language is typical of the central bank and not a cause for alarm.
Reacting on the social media platform X, Lee downplayed the significance of the Chair’s assessment.
He posed a rhetorical question to his followers: “When was the last time the Fed ever said stocks are ‘attractively priced’? (Hint: never)”.
Lee’s point was that the central bank historically avoids making overtly bullish statements on asset prices, and therefore, Powell’s observation should be considered standard procedure rather than a new, bearish outlook.
Tom Lee Clams The Investors Down: No ‘Ominous Sign’
Lee concluded his post with a direct piece of advice for investors who might have been unsettled by the Fed chief’s words. “PS: Please don’t see this as any ominous sign,” he wrote.
His take suggests that while the Fed acknowledges the market’s high valuations, it is not necessarily a signal of impending policy changes designed to cool the market, but rather a reflection of the current economic conditions.
Powell’s Admits That Fed Is Caught In A Tug-Of-War
The discussion began after Powell, speaking at a conference in Rhode Island on Tuesday, responded to a question about market prices, reported by CNBC.
While noting the Fed does not target specific asset levels, he conceded, “equity prices are fairly highly valued”. The comment came after the Fed had lowered its benchmark interest rate to a range of 4 to 4.25% just a week prior.
Powell’s prepared speech had already set a cautious tone, highlighting that downside risks to employment have risen and that inflation remains “somewhat elevated”.
During the Q&A portion of the event, Powell offered tempered remarks on artificial intelligence, calling it “too early” to declare it the most disruptive economic force of our time.
He acknowledged concerns about job displacement but emphasized that history shows innovation tends to generate new employment opportunities over time. “Some jobs will be phased out, some will evolve, and new ones will come." Yet, Powell indicated that it is still hard to predict how this will play out.
Price Action
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, rose in premarket on Wednesday. The SPY was up 0.13% at $664.10, while the QQQ rose 0.27% to $599.84, according to Benzinga Pro data.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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