Falling US shares tell us only that investors were overexcited in January

If you were the incoming or retiring chairman of the Federal Reserve, you might be quietly pleased to see stock markets plunge on the day of the handover. As Jerome Powell was sworn in on Monday to succeed Dr Janet Yellen as head of America’s central bank, the Dow Jones index of leading US stocks was falling by a one-day record of 1,175 points, with Asian, European and London markets following overnight.

But this wiping out of recent gains does not reflect badly on Yellen, whose steady hand leaves behind US inflation at just 2 per cent, unemployment barely above 4 per cent and a strongly recapitalised banking system. Nor does it indicate any radical shift to be expected from ‘Jay’ Powell, a lawyer-turned-banker who was widely seen as the most sensible ‘continuity’ choice Donald Trump could have made for the Fed, short of awarding Yellen the second term she would very much have liked.