The Federal Reserve called the social media stock bubble

Netease Technology News July 16 news, according to foreign media reports, the Federal Reserve recently warned there is a bubble in the biotechnology and social media stocks. Related stocks fell sharply on Tuesday.

As of Tuesday's close, the Nasdaq biotechnology index fell 2.3%, the largest decline in the week. Global X Social Media Index Trading Fund fell 1.1%. Both the Facebook and Pandora shares lost 1%. The Russell 2000 index representing small cap fell 1%.

Although unnamed, the Fed pointed out in a policy note today: "The valuations of some sectors are indeed sharply higher, especially for smaller companies in the social media and biotechnology industries, although the shares of these companies are trading at the beginning of the year There have been significant callbacks. "

As early as the beginning of this year, Federal Reserve officials made a cautious statement about the valuation of small companies. In February, Federal Reserve Governor Daniel Tarullo once said that policymakers should ensure that such stocks do not create systemic risk in the financial markets given the small-cap gains.

Concerns over the internet and biotech valuations have triggered a stock market rally earlier this year, with the Nasdaq Biotechnology Index falling 21% between February and April. However, due to investors optimistic about the economic trend, the index subsequently rose to the level before the decline.

The minutes of the Fed's June meeting show that some Fed officials are worried investors may be overly optimistic about the economic outlook and that central banks should be wary of excessive risk-taking.

Alan Gayle, a senior investment strategist at RidgeWorth Investment Company, said: "After the financial crisis, the Federal Reserve became aware of the need to expand its monitoring of the factors that affect financial stability and health, and today the move seems to imply that the Federal Reserve To be specific to the industry. "

There is no doubt that the stock prices of some living creatures and social media are indeed too high.

Take ForteMedicine (NASDAQ: VRTX) as an example, the stock is trading at 136 times future earnings, making it the second-highest-paid stock in the Nasdaq 100 index on Monday. The stock fell 2% after the Federal Reserve issued a statement. Even Facebook (NASDAQ: FB) future price-earnings ratio is about 37 times, and significantly higher than most stocks.

While the Fed has warned of possible small bubbles in its monetary policy report, the central bank fears about the stock market do not seem to be serious.

"In early July, the valuation of the entire market was above historical averages, but not much exceeded," the Fed said. This means that investors as a whole "did not over-optimistic about the stock market." (Zhao Chen)