Jerome Powell warned that U.S. stocks are expensive by several common measures, highlighting the precarious state of the market. His comments came during a Federal Reserve meeting on April 29, 2026.
The Fed held rates steady at 3.5% to 3.75% for the third consecutive meeting. The S&P 500 is currently trading at 20.9 times forward earnings, above its five-year average of 19.9 times. This raises concerns about potential market corrections.
Powell stated, “U.S. stocks are expensive by several common measures, and expensive markets have less room for error when inflation, oil prices, interest rates, or earnings disappoint.” The Shiller CAPE ratio has touched 40, suggesting high valuations for the U.S. stock market.
Concerns about inflation persist as PCE inflation sits at 3.5% year-on-year. Four members of the FOMC dissented during the meeting, marking the most fractured vote in 34 years. This indicates growing uncertainty among officials regarding future Federal Reserve policy.
The rising price of Brent Crude, which briefly touched $120.27 per barrel, adds to inflation concerns and complicates potential interest rate cuts. Higher oil prices can push inflation higher and create uncertainty for the Federal Reserve’s ability to cut rates.
Powell noted that “the economic impact of the conflict is still uncertain”—a reference to ongoing geopolitical risks affecting markets. He emphasized that nobody knows how long this pressure on oil, inflation, and markets will last.
The next expected development will be closely monitored as companies announced approximately $430 billion in buybacks this year, indicating ongoing confidence despite these warnings.
