When the head of the nation’s central bank deliberately talks down the market there's a reason for it, Tom Hutchinson, senior editor of the Newsmax newsletter "The High Income Factor," told Newsmax TV.

He believes that Federal Reserve Chief Janet Yellen is "talking down the market in anticipation of not raising rates." She wants to try to temper a possible bubble in valuations, Hutchinson told "Newsmax Now."

Yellen last week described stock market valuations as high and said the central bank was carefully monitoring their impact on financial stability.

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"I would highlight that equity market valuations at this point generally are quite high," Yellen said in conversation with Christine Lagarde, managing director of the International Monetary Fund, at an economics conference.

Coupled with weak economic reports in the morning, her remarks drove stocks broadly lower in Wednesday trading.

“Why is she talking about the market? Now Fed chairs are notorious for avoiding being clear about the direction of the market or their opinion evaluation. They go way out of their way to do that,” he said.

“When they deliberately talk about the market, there's a reason for it. What I personally think is the reason here is that the Fed is not going to raise rates in June or maybe even September and she's trying to talk down the market a little bit in anticipation of not raising rates,” he said.

But is Yellen trying to send a message to wary investors?

“My opinion is that if she was going to raise rates, why talk down the market? The rate hike would do that. The risks of not raising rates are that, you create a bubble. Too many people love the idea that rates aren't going up and flood into the market and she wants to temper that a little bit and avoid overvaluation.”

But if stocks are in a bubble, how close are we to the danger zone? “Sooner or later it'll have to burst but I don't think it will any time soon,” he said.

Turning to Verizon buying AOL: “They are behind the eight ball a little bit and they're trying to make up for lost time a little bit. But what you're seeing in the market overall is a slew of mergers. You're seeing activity that we haven't seen since before the financial crisis and you can expect a lot more of these kinds of deals.”

Meanwhile, he said investors should expect to see noteworthy mergers in a variety of industries.

“You're already seeing it biotech and healthcare. You're starting to see more of it in the financial industry and of course technology.”

He said such consolidation is common in times of a robust stock market.

“It's what you see in bull markets and frankly this bull market has been lagging past ones in terms of merger and acquisition activity. However it's turning around really fast. March and April were the best years in a long, long time, like maybe 15 years for that activity. So it's starting to come around in a big way. But this is taking place in all of the last bull markets in the last 25 years.”

About Tom Hutchinson
Tom Hutchinson is a member of the Newsmax Financial Brain Trust. Click Here to read more of his articles. He is also the editor of The High Income Factor. Discover more by Clicking Here Now.

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