Loose. Easy. Accommodative. These are just a few of the terms one could use to describe financial conditions in the U.S right now.
According to an index compiled by Goldman Sachs, financial conditions are now the loosest on record. The index, which dates back 30 years, is a combination of short- and long-term interest rates, the U.S. dollar, credit spreads, and equity prices—all of which have headed in the direction of looser financial conditions.
As our chart above shows, the index shot up during the previous two recessions—meaning financial conditions tightened or got worse. But it took many years before they were back to pre-crisis levels.
This year was different. Although financial conditions deteriorated rapidly in March, it was short-lived. Fast action from the Federal Reserve and Congress helped backstop the economy and the financial system. Financial conditions improved quickly and are now in a better place than where they started.
This is intended for informational purposes only and should not be used as the primary basis for an investment decision. Consult an advisor for your personal situation.
Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.
Past performance does not guarantee future results.