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Fed Chair and Rise and Fall of Market

By Charles Payne, CEO & Principal Analyst

I find it interesting that many are comparing this period of selling to 1987. A new Fed Chairman named Alan Greenspan started his new job that faced a market crisis situation.  As the man that would go on to be known as the Maestro, Mr. Greespan took swift action; the selloff was short-lived, and the ensuing rebound lasted more than a dozen years.

Greenspan took swift action by lowering rates and calming the fears of Wall Street. Later, he would be blamed for missteps in management - the market bubble on the upside and the downside.  Of course, Greenspan is best known for his observation of “Irrational exuberance,” a call on the stock market rally, which proved to be prescient four years later (I am writing this with a slightly tongue-in-cheek approach).

Yellen’s Revenge?

The New York Post headline says it all: ‘Yellen fears bubble as stock market sees sharp decline’

Former Fed chair Janet Yellen spoke to CBS news and suggested prices for stocks were high, pointing to “price to earnings ratios near the high end of their historical ranges.”  She also commented on the risk in commercial real estate, stopping short of saying the asset class is in a bubble. 

Yellen was known for her cautious approach to governing the Fed and speaking to the public that so many see her comments on the heels of a 666-point drubbing of the market as somewhat reckless. Of course, she’s still smarting over not being re-appointed by President Trump, and some think her comments were a little jab.

The good news is that Yellen doesn’t see a market pullback harming the economic recovery.

Whether deliberate or not, it didn’t help the situation yesterday. It puts more pressure on her successor Jay Powell to articulate a message that brings calmness to the market.

Jay Powell at the Plate

Jay Powell, the new Fed Chairman, started his first day on the job yesterday with the biggest single- session point loss in history.  Ironically, his best move may be to telegraph to investors that he won’t be making any moves, or at least fewer moves than the Fed previously signaled.  Investors will also want to hear from the White House very soon with soothing words that will direct attention to the underlying economic fundamentals.

Sector Watch

We were reminded there isn’t any sector to hide in when these swoons occur - even utilities.

S&P 500 Index


Consumer Discretionary (XLY)


Consumer Staples (XLP)


Energy (XLE)


Financials (XLF)


Health Care (XLV)


Industrials (XLI)


Materials (XLB)


Real Estate (XLRE)


Technology (XLK)


Utilities (XLU)


For those unfamiliar with these kinds of market drops, this is gut-wrenching; even for those of us that have been through a few market crashes, it’s not a pleasant ride. While it might sound callous, the fact is this selloff is happening so sharply that it takes us to where we have to be sooner rather than later. 


Charles Payne
Wall Street Strategies


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