Press conference exchange between JEFF COX and Fed Chair Jerome Powell:

user: Yes. Chair, thank you for taking the question. You’ve been asked this question before in various forms. I’m going to try it a little bit differently now. The equity market and the bond market seem to be telling two different stories about where, where things are heading. We on the stock market, bond yields remain very low. Does that concern you at all? Are, are you getting any more concerned about asset valuations in, in light of the highly accommodative Fed policies?

assistant: You, you were breaking up, but I, I think I got that. I think I got it. So, you know, financial stability—we, we look at a broad range of things. We actually have a framework so that we can, you know, be—evaluate changes in financial stability over time, and so that the public can evaluate whether we’re doing a job—a good job at it. We—so what do we look at? Asset prices is one thing that we look at. And, you know, we published a report a few weeks ago on that—maybe it was month or so ago. Anyway. And I think you’ll find a mixed bag there. It depends—with equities, it depends on whether you’re looking at P/Es or whether you’re looking at the premium over risk-free—over the risk-free return. If you look at P/Es, they’re historically high, but, you know, in a world where the— where the risk-free rate is sustain—is going to be low for a sustained period, the equity premium, which is really the reward you get for taking equity risk, would be what you’d look at. And that’s not at, at incredibly low levels, which would mean that they’re not overpriced in that sense. Admittedly, P/Es are high, but that’s—you know, that’s, that’s maybe not as relevant in a world where we think the 10-year Treasury is going to be lower than it’s been historically, from a—from a return perspective. You know, we look at—we also look at borrowing—leverage of financial institutions. We spent 10 years and the banks spent 10 years building up their capital. So far, they’ve been a source of strength through this crisis, and their capital has held up well. We look at leverage in the nonfinancial sector—that’s households and nonfinancial corporates. Nonfinancial corporate leverage is high. We’ve been watching that. But, you know, rates are really low. So—and so companies have been able to handle their debt loads even in weak periods, because rates are— rates are quite low. Your interest payments are low. Defaults and downgrades have, have declined since earlier in the year. Households came into this very strong, and there certainly has been a hit there for people who are unemployed. But, you know, with the CARES Act, Congress replaced a lot of lost income. You know, it’s very important that, that the economy gets strong again. I mean, the, the ultimate thing to support financial stability is a strong economy. The last thing is, is really funding markets. We found that there was a lot of unstable funding for companies, particularly financial companies. And that’s, that’s down to a—to a very low level these days. So the broad financial stability picture is, is mixed, I would say. I would say, you know, asset prices are, are a little high in that metric and in my view. But, overall, you have a mixed picture. You, you don’t have, you know, a lot of red flags on that. So—and it’s—again, it’s something that we monitor essentially ongoing, almost daily. You know, we’re, we’re monitoring these prices for that and, and have published our, our framework, and, you know, we’ll be held accountable for what we saw and what we missed. So we work very hard at it.