In this article, I would like to tell you which sections they are, how significant the impact of Yellen’s comments could be, and how to handle the situation as an investor.
Whether or not her words are true, Yellen caused immediate pain to the social media and biotechnology sections of the economy when she said the valuation in shares of those two sections are, “substantially stretched.”
The comments came in the Fed’s annual report to Congress. Yellen’s words about biotech and social media companies were part of a bigger message in which she explained that economic recovery is not complete, and that the Fed is not ready to raise interest rates.
Instead, the Fed is planning to raise rates in 2015.
When we look at the short term, Yellen’s statements caused the two singled-out sections of the market to take a bit of a tumble. The impact certainly wasn’t catastrophic, but it is out of Yellen’s hands at the moment.
Now, the immediate future of biotechnology and social media stocks is at the mercy of the market. It depends on the public’s sentiment toward those two sections.
How much does the average investor believe in biotech stocks? Will everyone be scared away from social media stocks because of the comments, and cause that part of the market to drop?
We can’t know those answers for sure. What we do know is that we are still in the midst of a bull market, and that tech stocks hold one of the best chances of becoming your lottery ticket.
So what should we do?
In my eyes, it’s simple. In the short term, we need to keep a watchful eye on the biotech and social media sections of the market. Meanwhile, there are plenty of other areas of technology that look exciting right now.
We can continue to beat the market by doing what we have always done—careful inspecting the market and making educated decisions about our investments—while also making use of the information we can gain from comments like the ones coming from the Fed.
When investing, it simply becomes a matter of separating the stocks that could become huge winners from those that might be held back by circumstances like the one currently supplied by Yellen.
If you would like me to do this for you, join Tech Stock Jackpot.