When Alan Greenspan famously referenced the possibility of "irrational exuberance" boosting the market in December of 1996, stocks had risen roughly 70% in the prior two years and were sitting at unforeseen levels. But perhaps more importantly was the fact that this infamous phrase of woe from a Federal Reserve chairman was largely ignored, as stocks continued to rally for another four years, tacking on an additional 100%.
Fast forward the clock 17 years and once again we have a Fed chairman discussing record high stock prices, only in this instance, Ben Bernanke not only refused to take credit for the rally, but went one step further, saying "At this point, we don't see anything out of line with historical patterns."
As my co-host Jeff Macke and I discuss in the attached video, while many investors are nervous about lofty stocks right now, Bernanke does not appear to be one of them. I like to call this his anti-irrational exuberance moment, as his remarks aimed to defuse investor worries rather than heighten them, and even saw the Fed chief advancing the theory of inflation-adjusted stock prices still being well below an all-time high.
Further soothing investor nerves, the central bank showed no signs of curtailing its $85 billion a month bond buying habit, and also made no drastic adjustments to its economic growth targets, despite the newly added (and much feared) headwind coming from automated Federal budget cuts known as the sequester.
And finally, for those expecting to hear the Fed say something dire in relation to the current crisis in Cyprus or the worsening climate in Europe, Bernanke was having none of it, saying the world's most astounding bank rescue plan was not a major threat to the U.S.