The St. Louis Fed’s Financial Stress Index dipped to -1.419 in the week ended January 3, down from the -1.399 in the prior week, but above the -1.430 in the December 20, 2019 week. The index is trending around the readings seen in late 2017 and early 2018. I anticipate the index will climb again in the report for January 10 due to geopolitical developments related to the assassination of Major General Soleimani on January 3 and separately on concerns about risks in some credit markets. Nonetheless, signs of a possible recession continued to retreat as the gap between Treasury yields were more visible.
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