Financial Market Stress Declines for Second Consecutive Week

The St. Louis Fed Financial Stress Index (STLFSI) declined in the latest reporting week, marking the second consecutive decline after seven weeks of increases. For the week ending Oct. 31, 2014, the STLFSI measured -1.099, down from the previous week’s revised value of -1.023. The STLFSI has registered below-average levels of financial stress for 152 consecutive weeks.

Over the past week, nine of the 18 indicators contributed negatively to the change in the STLFSI, two more than the previous week. Consistent with the prior week, the STLFSI’s bond and equity market volatility components—the Chicago Board Options Exchange Market Volatility Index (VIX) and the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo)—made the two largest negative contributions to the weekly change in the index. Six of the 18 indicators contributed positively to the change in the STLFSI, one fewer than the previous week. Consistent with last week, the yield on the Baa-rated corporate bond (BAA) made the largest positive contribution.

Over the past year, eight of the 18 indicators contributed positively to the change in the STLFSI. The largest positive contribution was made by the expected inflation rate over the next 10 years (BIR_10yr). Nine of the 18 indicators made a negative contribution to the STLFSI over the past year, unchanged from the previous week. The largest negative contribution was made by the BAA.

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