Financial Market Stress Falls for the Sixth Consecutive Week


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

Financial market stress declined for the sixth consecutive week, according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending April 24, 2015, the STLFSI measured -1.232, down modestly from the previous week’s revised value of -1.202. Despite the economy’s overall weakness in the first quarter, financial market stress has declined significantly since it last peaked at -0.879 during the week ending Jan. 16, 2015. (Normal stress=0.)

STLFSI Weekly Change graph

Over the past week, eight of the 18 indicators contributed negatively to the STLFSI, five fewer than the previous week. The largest negative contribution over the past week was made by the expected inflation rate over the next 10 years (BIR_10yr), followed by the Chicago Board Options Exchange Market Volatility Index (VIX). Seven of the 18 indicators contributed positively to the weekly change in the STLFSI, four more than the previous week. The largest positive contribution was made by the yield on corporate Baa-rated bonds (BAA).

STLFSI Yearly Change Graph

Over the past year, 11 of the 18 indicators made a positive contribution to the index, unchanged from the previous week. For the second consecutive week, the largest positive contribution over the past year was made by the BIR_10yr. Seven indicators made a negative contribution to the index, also unchanged from the previous week. For the 28th consecutive 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.

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The St. Louis Fed Financial Stress Index (STLFSI)

Link to STLFSI in FRED

The STLFSI measures the degree of financial stress in the markets and is constructed from 18 weekly data series: seven interest rate series, six yield spreads and five other indicators. Each of these variables captures some aspect of financial stress. Accordingly, as the level of financial stress in the economy changes, the data series are likely to move together.

How to interpret the index
The average value of the index, which begins in late 1993, is designed to be zero. Thus, zero is viewed as representing normal financial market conditions. Values below zero suggest below-average financial market stress, while values above zero suggest above-average financial market stress.

Note that the bar charts plot the change in the contribution from one week to the next or from the current week compared to the value 52 weeks earlier.

More information
For additional information on the STLFSI and its construction, see "Measuring Financial Market Stress" and the related appendix.

FRED (Federal Reserve Economic Data) is the main economic database of the Federal Reserve Bank of St. Louis.