Please note: Data values previously published are subject to revision. For more information, refer to the vintage series in ALFRED®.
In response to a marked increase in equity and bond market volatility, the St. Louis Fed Financial Stress Index (STLFSI) rose sharply in the latest reporting week. For the week ending July 3, the index measured -0.920, its highest level since the week ending Sept. 6, 2013. (Zero represents normal financial market conditions.)
Over the past week, 11 of the 18 indicators contributed positively to the weekly change in the index, four more than the previous week. The largest positive contributions were made by the index’s two market volatility measures: the Chicago Board Options Exchange Market Volatility Index (VIX) and the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo). Four indicators contributed negatively to the weekly change in the index, six fewer than the previous week. The two largest negative contributions were made by the yield on 30-year U.S. Treasury securities (Treas30y) and by the yield on 10-year U.S. Treasury securities (Treas10y).
Over the past year, 14 of the 18 indicators made a positive contribution to the index and four indicators made a negative contribution. For the 10th consecutive week, the largest positive contribution over the past year was made by the Mlynch_BMVI_1mo. For the ninth consecutive week, the largest negative contribution over the past year was made by the S&P500 Financials Index (SP500_FI).
For an explanation of the 18 component variables in the STLFSI, refer to the STLFSI Key.
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.
FRED (Federal Reserve Economic Data) is the main economic database of the Federal Reserve Bank of St. Louis.