25 September 2018

Bloomberg Financial Condition Index

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Source: Bloomberg.com

Bloomberg Financial Condition Index (BICIUS) measures a basket of equity and credit measures to gauge the state of the U.S. financial system.  For example on January 1, 2013 the Financial Conditions Monitor closed above 1 for the first time since late February 2007. This indicates that the financial system is 1 standard deviation above normal.  February 2007 marked the beginning of the sub-prime crisis as the first lenders were forced into bankruptcy and the SPX index suffered its first -2% single day decline in four years on February 27th, signaling the beginning of the turbulence that was to accelerate for the next two years. This is a significant milestone that completes the four year recovery process from the depths of the crisis when this index reached a remarkable negative reading of -12.6% Standard Deviation in October 2008.

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