Financial Market Stress Declines Slightly

Please note: Data values previously published are subject to revision. For more information, refer to the vintage series in ALFRED®.

Financial market stress has declined for the second consecutive week. For the week ending Jan. 1, the St. Louis Fed Financial Stress Index (STLFSI) measured -0.607, down slightly from the previous week’s revised value of -0.598. 

Over the past week, nine of the 18 indicators contributed negatively to the weekly change in the index, three more than the previous week. The two largest negative contributions were made by the expected inflation rate over the next 10 years (BIR_10yr) and by the yield spread between the Merrill Lynch High-Yield Corporate Master II Index and the 10-year Treasury security (HighYield_CRS). Eight of the 18 indicators contributed positively to the weekly change in the index, one fewer than the previous week. The two largest positive contributions were made by the Chicago Board Options Exchange Market Volatility Index (VIX) and by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo).

Over the past year, 15 of the 18 indicators made a positive contribution to the index, one more than the previous week. Like the previous week, the largest positive contributions were made by the Merrill Lynch High-Yield Corporate Master II Index (Mlynch_HighYld_MasterII) and the HighYield_CRS. Also as in the previous week, the largest negative contribution over the past year was made by the Mlynch_BMVI_1mo.

For an explanation of the 18 component variables in the STLFSI, refer to the STLFSI Key.