The St. Louis Fed’s Financial Stress Index for the week ending May 17 rose to -1.249 after -12.63 in the prior week, a notable increase from the -1.351 in the week before. The reading was the highest since -1.220 in the March 29 week that followed the yield curve inversion on March 22.
It would vastly overstate conditions to infer any substantive stresses exist at present in financial markets. However, perceptions of conditions are likely to be less complacent in coming weeks as markets deal with concerns about risks associated with high levels of nonfinancial debt and uncertainties related to trade and tariff policy that are likely to linger. Worries that the US economy is facing a downturn or at least a downgrade in the expansion will add to overall lower confidence.
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