Thursday, February 18, 2016

Measures of Stress: January 2016

Various regional Federal Reserve Banks routinely publish measures of financial stress which seek to distill many indications of financial turmoil down to convenient single "stress" data points.

As periods of financial stress come and go a whole host of fundamental economic indicators immediately adjust to meet the near and long term expectations of market participants

Interest rates, yields spreads, popular market volatility indices all move in real time giving observers unequivocal evidence of changes general sentiment.

The Federal Reserve Banks of Chicago, Kansas, St Louis and Cleveland all publish similar series which combined, offer a unique view of current financial conditions.

In January, all measures of stress appear to be on the rise with Cleveland's index, at a level of 1.52, giving the most notable indication of deteriorating conditions.