Monday, May 9, 2011

Financial conditions have turned healthy


A reminder that financial conditions are looking pretty healthy these days (the more the index is above zero the better), and that is always supportive of growth. Index components: TED spread, CP/Bill spread, Libor/OIS spread, investment grade corporate bond spread, muni spreads, swap spreads, high-yield spreads, agency spreads, equity prices, and the VIX index. It's also a reminder of how far we've come in the past two years.

5 comments:

Karim said...

I am not sure, looking at this chart,going thru the 90's, and early 2000's,that this index can predict anything, so, although I apprciate the articles on this site, maybe I need further explanation on the expected conclusions of this article...

Scott Grannis said...

I think the index is quite valuable as an early warning indicator. I would note that the index fell significantly more than one year prior to the financial crisis. It then began rising significantly well before the end of the recession. Indeed, it would be hard to find a better leading indicator than this one. What it is saying now is that it is highly unlikely that we are approaching any major type of crisis or recession.

Benjamin said...

I think we are in the first inning of a secular global bull market.

William said...

Mr. Grannis, thank you for pointing out that this Index is a useful "leading indicator". I hadn't followed it before.

Your Blogs are truly informative! Thanks a bunch.

William

TradingStrategyLetter - Weekly Summary said...

Scott sure does nice work.