In highly watched and analyzed Congressional testimony today, Federal Reserve Chief Janet Yellen stated that a high level of monetary accommodation remains necessary to support growth in the economy and job creation. Yellen believes the economy remains far from satisfactory and still needs considerable help.
What’s the point? The Fed is not changing its tune relative to its current monetary policy, which remains highly accommodative. The implications for financial assets, particularly stocks, remains unchanged: the Fed’s ultra low interest rate policy has been an important factor in supporting valuations of financial assets (stocks and bonds) for the past several years. With returns on bonds extremely low, quality dividend-paying stocks continue to remain attractive and we expect there will be continued flow of capital from bonds to quality dividend stocks, which we expect should support higher valuations for quality dividend-paying stocks.
Link: http://money.msn.com/business-news/article.aspx?feed=OBR&date=20140507&id=17596054