US Financial Conditions Index Hits 8-Month High

The Bloomberg U.S. Financial Conditions Index “combines yield spreads and indices from the Money Markets, Equity Markets, and Bond Markets into a normalized index. The values of this index are z-scores, which represent the number of standard deviations that current financial conditions lie above or below the average of the 1992-June 2008 period.”

MP: The chart above displays the Bloomberg U.S. Financial Conditions Index daily from May 1, 2007 to May 15, 2009, and shows that the index reached an 8-month high Friday, the highest level since Sept. 12, 2008. Based on this measure, financial conditions in the U.S. were at their worst in October 2008, and have been improving for the last 7 months. Assuming that an index level of zero is considered “normal,” it might still be some time before financial conditions fully recover, but there has been significant recovery going on for many months, and the index is headed in the right direction.

Thanks to UM-Flint student Josh Charchan for help retrieving the data.

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