Janet Yellen is facing Congress on Wednesday for her semi-annual testimony.
And one year ago today, Yellen’s monetary policy report warned about stock market valuations, particularly in social media and biotech stocks.
It was an awful call.
Yellen’s testimony last year said:
“Some broad equity price indexes have increased to all-time highs in nominal terms since the end of 2013. However, valuation measures for the overall market in early July were generally at levels not far above their historical averages, suggesting that, in aggregate, investors are not excessively optimistic regarding equities. Nevertheless, valuation metrics in some sectors do appear substantially stretched — 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.”
Since Yellen said this, the iShares Nasdaq Biotechnology Index ETF has risen 50%.
It’s been a wild surge that included a 10% correction in April, but all in all, it’s been profitable to ignore Yellen: the S&P 500 is up 7% over the same period.
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