Wells Fargo & Co (WFC): Bernanke’s “Irrational Exuberance” Moment

And a secondary effect — though it won’t seem secondary to the average investor — will be to drive overall asset prices down. By this, I mean stock and bond prices specifically. This is why Warren Buffett says that the official announcement that QE3 is ending will be analogous to the “shot heard round the world.” For those of you who are a little rusty on history, this references the respective shots that triggered the American Revolution and World War I.

I’ve discussed this in multiple articles recently — most comprehensively this one — but here’s the reason: Since QE3 was announced last September, the Dow Jones Industrial Average has shot up by more than 17%. While this isn’t as much as the roughly 80% gain in the Nikkei following the announcement of Abenomics in Japan, a correction from these heights would nevertheless be far from pleasant. This is why stocks have been particularly volatile lately. As my colleague Matt Thalman noted yesterday, Tuesday marked the 6th consecutive 100-point move for the Dow.

At the end of the day, the point is that, at least for the foreseeable future, investors and analysts will be waiting with bated breath for any and all news out of the Fed. And when that news does come, it’s safe to assume Bernanke’s moment will far surpass Greenspan’s in terms of roiling the markets.

The article Bernanke’s “Irrational Exuberance” Moment originally appeared on Fool.com and is written by John Maxfield.

John Maxfield owns shares of Bank of America. The Motley Fool recommends Bank of America Corp (NYSE:BAC) and Wells Fargo & Co (NYSE:WFC). The Motley Fool owns shares of Bank of America, JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo.

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