Yellen says that traders ought to be very cautious in some sectors, calling Bitcoin “extremely speculative”.
Outgoing Federal Reserve Chair Janet Yellen holds a press conference following a two-day meeting of the Federal Open Market Committee (FOMC) on December 13, 2017 in Washington, USA.
Jonathan Ernst | Reuters
Treasury Secretary Janet Yellen told CNBC Thursday that there may be parts of the US stock market that investors should be careful about.
In an interview broadcast on Closing Bell, Yellen said she found higher stock valuations understandable given the Federal Reserve’s accommodative monetary policy.
“Well, in some cases we are in a very low interest rate environment,” said Yellen. “And while valuations are very high, in a world with very low interest rates, price gains and tight multipliers tend to be high. That means there may be sectors where we should be very careful,” added Yellen, who took over in late January President Joe Biden assumed the position of chief financial officer.
The comments came in response to a question posed by CNBC’s Sara Eisen, who asked if Yellen made sense for major U.S. stock indices to trade near record highs during the coronavirus pandemic and the economic damage it caused. She also inquired about large stock moves on IPOs and SPACs.
Yellen did not indicate which sectors it was referring to.
Bitcoin has also taken a big leap in the past few months, with the world’s most valuable cryptocurrency breaking above USD 52,000 for the first time on Wednesday.
Yellen said she views Bitcoin as a “highly speculative asset” and noted that there has been high volatility in recent years. When asked if she believes this needs to be regulated, Yellen said that any action must be about protecting investors.
“I think it is important to make sure that it is not used as a means to initiate transactions and that there is investor protection,” said Yellen, a former Fed chairman. “So I think it is certainly important to regulate institutions that deal with Bitcoin and make sure they meet their regulatory responsibilities.”
Cryptocurrencies have been widely adopted by established financial firms recently. Mastercard announced last week that it intended to support certain cryptocurrencies on its formal network, while BNY Mellon, the country’s oldest bank, will set up a digital assets unit later this year.