Saturday, May 16, 2009

US Financial Conditions Index Hits 8-Month High

The Bloomberg U.S. Financial Conditions Index "combines yield spreads and indices from the Money Markets, Equity Markets, and Bond Markets into a normalized index. The values of this index are z-scores, which represent the number of standard deviations that current financial conditions lie above or below the average of the 1992-June 2008 period."

MP: The chart above displays the Bloomberg U.S. Financial Conditions Index daily from May 1, 2007 to May 15, 2009, and shows that the index reached an 8-month high yesterday, the highest level since Sept. 12, 2008. Based on this measure, financial conditions in the U.S. were at their worst in October 2008, and have been improving for the last 7 months. Assuming that an index level of zero is considered "normal," it might still be some time before financial conditions fully recover, but there has been significant recovery going on for many months, and the index is headed in the right direction.

Thanks to UM-Flint student Josh Charchan for help retrieving the data.


At 5/17/2009 1:46 AM, Blogger bobble said...

a contrasting view

At 5/18/2009 8:00 PM, Anonymous Anonymous said...

it appears we're at the same level that we were at before a huge crash.
so, what does this whole thing prove. that everything is alright?

At 5/19/2009 8:06 PM, Blogger Methinks said...

The only thing that chart makes me think is that the next bubble will be in equity markets. In the 1990's the Nikkei used to have the same kind of run-ups after a not as bad as expected number comes out - just to sink back down.

The outlook may be better than it was on March 9th, but it's not that much better. Once we account for the horrible economic policies of the current administration, the outlook may be much worse than on March 9th.

Over the past few months, the SEC, Treasury and the Fed in combination with large mutual fund families and banks have all been working overtime to re-inflate the credit bubble and manipulate asset prices.

When this thing pops, it'll be really ugly.


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