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The stock market has rocketed up after Janet Yellen spoke in front of Congress. Ms Yellen was largely singing from the same song sheet as Ben Bernanke, the previous Fed Chief, so what was it that the stock market liked so much?
Well, the old adage is that the market dislikes uncertainty and what we got today was reliable, consistent, expected. In other words, her speech reduced uncertainty rather than introducing any, letting the market know what to expect in terms of stimulus reduction and whether policy will remain accommodative.
Ms Yellen’s observation that the job market is still underperforming is no surprise, given the recent data. Today the US Labor Department released the results of its Job Openings and Labor Turnover Survey (JOLTS) for December, which showed 3.990 million job openings at the end of December, compared to 4.033 million in November.
Another area of uncertainty that appears to be receding is the possibility of a repeat of last year’s fiscal spats in Washington, with Republican leaders indicating that they will propose a bill to extend the US debt limit without including any additional measures.