Confirming last year's warning, The Fed's Monetary Policy Report has sent a broad message to the markets in what may be Yellen's Irrational Exuberance 2.0 moment:
"Overall equity valuations by some conventional measures are somewhat higher than their historical average levels, and valuation metrics in some sectors continue to appear stretched relative to historical norms...
With regard to asset valuations, price-to-earnings and price-to-sales ratios are somewhat elevated, suggesting some valuation pressures...
...valuation pressures are notable in some asset markets,
At lower-rated and unrated nonfinancial businesses, however, leverage has continued to increase with the rapid growth in high-yield bond issuance and leveraged loans in recent years... new deals continue to show signs of weak underwriting terms and heightened leverage that are close to levels preceding the financial crisis.
Of course, as we saw previously, markets have no interest in 'following the Fed' when they say "sell."
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Full Monetary Policy Report: