Thursday, 14 March 2013

St. Louis Financial Stress Index hits yet another low

The St. Louis Financial Stress Index finished the week ending 8 March on -0.627, the lowest since week ending 27 July 2007. Lower values indicate less financial stress in the U.S. economy.

By and large, the index has declined steadily since the end of May last year. In tandem with these declines in the St. Louis FSI, the S&P 500 climbed upwards and moved into overvalued territory. Too good to be true for too long? Yes, probably, achieved with good help from Federal Reserve liquidity injections and low interest rates. Don't be surprised by a an upward movement in the St. Louis FSI in the near future and a stock market correction.

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