The last such decline came in early 2016, when oil prices were plunging as investors anxious that slowing global growth might sharply reduce demand. "But I do want to say high", Yellen said on CBS's "Sunday Morning" in an interview recorded Friday as she prepared to leave the central bank.
The rule book is now changing, a shift that is sending tremors through the financial markets.
The volatility has been triggered by fears of rising inflation in the U.S. and a policy error from the Federal Reserve, which caused bond yields to widen to 2.73% on 29 January, the highest since April 2014.
The explanation, as I noted in this space, is that investors now believe the Federal Reserve will raise interest rates faster than they'd previously anticipated.
At the moment, interest rates are incredibly low: Just 1.25 to 1.5 percent.
It's an interesting complexity for investors to assess.
The stock market can, when looked at in concert with these other indicators, provide some useful insight. The strong job report last week fueled hopes that wage growth would follow.
Continuing in the same direction, however, may be a challenge for the new governor.
There's a new leader at the Fed: Jerome Powell.
What is Janet Yellen doing after concluding her historic four-year term as the first woman to chair the Federal Reserve?
See the full report on Yellen's exit interview. Trump has nominated Carnegie Mellon economist Marvin Goodfriend for one opening.
What is the stock market telling us with its precipitous drop over the last several days?
In a video posted to the Fed's website Monday, Powell said, "Today, unemployment is low, the economy is growing, and inflation is low".
That's because the stock market, though crucial in the long run for individuals accumulating wealth and companies raising capital, is so erratic as to be useless in providing information about the short run. But any drop of the local market because of fears about the Fed is only a knee-jerk reaction and may turn into a trap. There's something fundamentally wrong when the 10-year Treasury yield can't rise above 2.75 percent without fear of a market crash. But the declines snowballed throughout the afternoon. The 8.5 percent drop in the S.&P. Fed Gov. Lael Brainard also supported the action. Higher pay and inflation typically do kick in after years of steady economic growth. In reality, the USA economy is doing very well right now.
It grew at an annual pace of 2.6 percent last quarter.
The Tokyo benchmark bounced throughout the day, closing 4.7 percent lower at 21,610.24.
In essence, the $1.5 trillion tax cut may be stimulus that the economy doesn't need. It's also the prospect of more inflation.
Global markets also fell.
Another factor that one would have thought would have shaken the Fed out of its inflation risk complacency has been the USA dollar's marked decline.
Investors should step back and take a deep breath. The Nasdaq composite lost 273.42, or 3.8 percent, to 6,967.53. If anything, it's been driven by too much good news. Minutes after the bell to signal the start of trading, the FTSE 100 index of leading British shares was down 2.5 percent at 7,151, while the CAC 40 in France slid 3 percent to 5,127.
The Dow is still up 21 percent over the past 12 months, and the S&P 500 is up 15 percent.
There is enough volatility in our market system.
For example, oil prices have risen as global growth has picked up steam. Further interest rate hikes would drive up mortgage rates, which, when combined with widespread affordability and inventory issues throughout many parts of the country, could make the difference between many potential homebuyers choosing to purchase a home or stick with the rental market. ExxonMobil has said it plans to spend $50 billion on investments in the United States over the next five years.
"People may be a little concerned that the new team at the Fed is a little inexperienced", said Joel Prakken, chief US economist for Macroeconomic Advisers by IHS Markit.