The coronation of QEeen Janet Yellen was the most talked about financial market event of the past few days. In a surprise to no one, she was dovish, trotting out typical lines about needing to continue QE to 'support the economy'. 'progress has been made', 'there's more work to be done' etc. A couple of comments were a little more noteworthy, claiming that (in reference to QE) We're using policies that have never really been tried before and that unless the economy is normal interest rates can't rise. Despite this, she's adamant there's no bubble in the markets, even though she's previously admitted to being blind to the obvious bubbles which existed pre GFC. For now, markets are calm, but the obvious questions remain. How can asset prices close to all time highs be justified when the economy is 'not normal' and we are in 'unchartered territory' in terms of policy?
Have a look at the post from Jay Soloff from earlier today. Raises similar questions but in the short term this looks to be direction that markets will continue to take. Interesting article on whether we are now in a position where bubbles are required to deliver growth http://www.businessinsider.com.au/do-we-need-bubbles-for-strong-economic-growth-2013-11