Planning Briefs

The Standard & Poor’s 500 stock index closed today at 4164.66, 1% off its all-time high of 4211.47 set last Thursday. Stocks have continued to break records for months and a market melt-up is possible. Are stocks fairly priced? For the answer, we turn to Jerome Powell, the U.S. Federal Reserve Bank chairman.  

Fed chairmen generally avoid talking the stock market up or down. However, at a recent press conference, Mr. Powell was asked about the fact that stocks are highly-priced by traditional valuation standards, like price-to-earnings (P/E) ratios. Mr. Powell’s answer is important to investors, though it did not get much press. That day, the East Coast faced the worst winter storm in years and a lot of things were going on, as always. But here’s what Mr. Powell said: “Admittedly, P/Es are high, but maybe that's not as relevant in a world where we think the 10-year Treasury is going to be lower than it's been historically.”