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Chart of the Day: US Financial Conditions Index at 32-month high

The US Financial Conditions Index (BFCIUS) is a composite measure of the condition of U.S. financial markets, using yield spreads, indices from bond, equity and money markets. Right now, it is at a 32-month high.

But, while this is supposed to measure market strength, it really seems to measure market bullishness. I see the US Financial Conditions Index (BFCIUS) as somewhat of a contrarian indicator.  As you can see from the chart above, the index tanked in September 2008 when Lehman Brothers went bankrupt. But immediately, it resumed an upward path due to the huge numbers of government backstops and liquidity measures, plateauing in March 2009 right when equities bottomed.

From April 2009 onward it was off to the races.

Source

US Financial Conditions Index – Bloomberg.com

About Edward Harrison

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages, a skill he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.

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