Jitters rise over global stock markets
Fears for some sort of sharp correction in global stock markets are growing this week, says the former chief of an Irish stockbroking firm, as jitters about sky-high valuations of American stocks continue.
John Conroy, the founder of Merrion Capital, who sold his stake in the broker four years ago and now runs a €100m health tech fund, said there was still “fundamentally good support” for stock valuations from good company earnings.
However, the risks from inflation in the US, and political conflict around the world had increased too. Some of the gains for the Dow Jones index in the US were “quite frothy”, he told the Irish Examiner.
On Friday, US stock indices, including the Dow and Standard & Poor’s fell by up to 2.5%. European stock indices fell by up to 1.8%, wiping away all their gains over the previous month.
Jitters may further increase on news that outgoing US Federal Reserve chair Janet Yellen said US stocks and commercial real estate prices are elevated, though she stopped short of saying those markets are in a bubble. “Well, I don’t want to say too high. But I do want to say high,” Ms Yellen said on CBS’s Sunday Morning programme in an interview recorded on Friday.
“Price-earnings ratios are near the high end of their historical ranges,” she said.
Commercial real estate prices are now “quite high relative to rents,” Ms Yellen said. “Now, is that a bubble or is it too high? And there it’s very hard to tell. But it is a source of some concern that asset valuations are so high.” Ms Yellen, 71, stepped down as Fed chief on Saturday after one term, after US president Donald Trump opted to replace her with Republican Jerome Powell, who’s been a Fed governor since 2012. “I made it clear that I would be willing to serve, so yes, I do feel a sense of disappointment” about not being renominated, Ms Yellen said.
She said she is supportive of former investment banker Mr Powell, 64, whom she termed “thoughtful, balanced, and dedicated to public service”. The financial system is now “much better capitalised” and the banking system “more resilient”, Ms Yellen added.
Additional reporting by Bloomberg
