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The FRED Equity-Related Economic Uncertainty Index reached its sixth-highest reading ever today, as liquidity continues to dry up for risk assets. Spikes in this index typically coincide with significant drawdown periods in the S&P 500 Index.
“The consequences of the falling prices in debt instruments is higher financing costs in the broader economy, as a forty-year high in the consumer price index along with a slightly hawkish Federal Reserve Board has lenders looking for higher yields.
“What should be watched going forward is how credit markets trade, as this has a direct impact on equity markets from a corporate financing perspective but also a market valuation perspective.
