Janet Yellen Speaks Out on Volatility
The United States Secretary of the Treasury, Janet Yellen recently told lawmakers that the Covid-19 pandemic and the war in Ukraine may continue to add turbulence to the world economy. The war in Ukraine has disrupted supplies of food and energy, contributing to the highest level of inflation in decades. The average price of regular gasoline has jumped about 25% to record highs since Russia invaded Ukraine in late February. Yellen said financial regulators will continue to monitor developments and “coordinate actions as the risks and threats evolve.”
“There is the potential for continued volatility and unevenness of global growth as countries continue to grapple with the pandemic,” Yellen said during a hearing on the Financial Stability Oversight Council’s (FSOC) annual report to Congress. “Russia’s unprovoked invasion of Ukraine has further increased economic uncertainty.”
Inflation fears have helped trigger sweeping volatility on Wall Street as investors worry about the Federal Reserve’s plans to significantly raise interest rates. Still, Yellen said the US financial system has continued to function in an orderly manner. At the same time, Yellen conceded that valuations of some unspecified assets remain high compared with historical values.
“The U.S. financial system has continued to function in an orderly manner, though valuations of some assets remain high compared with historical values,” She added.
U.S. stocks sank again on Monday as the broad S&P 500 index added to its longest losing streak since mid-2011 and touched a one-year low as rising interest rates fueled worries of far-tighter monetary conditions. The Dow Jones Industrial Average was last trading up 94 points, or 0.3%, after rising more than 500 points and dipping more than 350 points earlier in the session. The S&P 500 rose 0.9%, while the Nasdaq Composite added 1.8%.
Meanwhile, Treasury yields eased from multiyear highs and the benchmark 10-year Treasury note yield traded below 3% after hitting its highest level since late 2018 on Monday. Much of the recent market moves have been driven by the Federal Reserve and how aggressive it will need to act to fight rising inflation.
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