By Jeanna SmialekFormer Federal Reserve Chairman Ben Bernanke isnt worried about recent selloff in US equities.
In fact, he isnt even surprised.I dont think this is way out of range of relatively normal behavior -- we have uncertainty about trade, weve got uncertainty about global economy, weve got uncertainty about near-term path of US economy, Bernanke said Saturday during a panel discussion with former Treasury Secretaries Henry Paulson and Timothy Geithner.
Markets absorb that uncertainty and reflect that.Bernankes comments during annual meeting of American Economic Association follow a tumultuous two months for investors, during which stock prices have gyrated wildly on news about US trade war with China, outlook for Fed interest-rate increases, and a partial US government shutdown.The SP 500 Index jumped 3.4 per cent on Friday after current Fed chief Jerome Powell hinted hed be open to pausing central banks campaign of gradual tightening by stressing policy patience amid muted pressures for higher inflation.Even so, benchmark index remains roughly 14 per cent below its September peak as investors fret over outlook for economy despite still-solid US jobs data and strong US output growth in 2018.
Bernanke dismissed idea that current outlook looks anything like landscape that confronted investors during financial crisis.Having our experience 10 years ago, were certainly not seeing those kinds of risks, Bernanke said.
I found it actually quite surprising how benign markets were for such a long time, despite risks of trade wars and other things that were going on.Asked about suggestions by some investors that Feds ongoing reduction in its balance sheet has created recent volatility in financial markets, Bernanke replied, well have to see how things evolve, but so far evidence is fairly weak.Powell said Friday that he didnt believe that balance-sheet runoff was to blame for market turbulence.