Federal Reserve chair Janet Yellen is giving her bi-annual testimony in front of the Senate Banking Committee on Tuesday.
Yellen’s prepared remarks can be found here.
Business Insider’s live blog of Yellen’s Q&A session can be tracked here.
Along with this testimony the Fed also releases a detailed assessment of financial conditions, and in its assessment, the Fed said that some stocks look a little bit pricey.
Here’s the Fed:
Overall equity valuations by some conventional measures are somewhat higher than their historical average levels, and valuation metrics in some sectors continue to appear stretched relative to historical norms.
The Fed added:
With regard to asset valuations, price-to-earnings and price-to-sales ratios are somewhat elevated, suggesting some valuation pressures. However, estimates of the equity premium remain relatively wide, as the long-run expected return on equity exceeds the low real Treasury yield by a notable margin, suggesting that investors still expect somewhat higher-than-average compensation relative to historical standards for bearing the additional risk associated with holding equities.
Back in July, the Fed made headlines when it said that valuation measures in social media and biotech industries appeared “substantially stretched.”
The Fed’s comments on Tuesday are bit more muted than that language — not specifically calling out the social media and biotech sectors of the market — but the Fed is clearly still keeping an eye on financial markets as it looks to raise interest rates for the first time since 2006.