Financial Stability Report May 2021

Posted on May 6, 2021 by Florian Buschek

The Fed Financial Stability Report is out and of course the media tells us that the Fed warns of excessive asset prices. Well not so fast. First of all

“Given the high level of uncertainty associated with the pandemic, assessing valuation
pressures is particularly challenging, and asset prices remain vulnerable to significant
declines should investor risk sentiment fall or the economic recovery weaken.

Financial Stability Report – November 2020

Did we read the same headlines back then? Of course not. But then in the new report we have this

So all this report tells us that the equity risk premium ie “the market” is completely normal but there is a series of small bubbles including SPACs and meme stocks (which are partially already deflating). Who woulda thought.

The good thing is that the Fed will probably more closely watch hedge fund and family office leverage now.

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