Last month we posted "How Can We Have A Bear Market Rally? Because Financial Conditions Aren't Getting Tighter, Au Contraire...."
Here's the latest reading of the Chicago Fed's National Financial Conditions Index, via the St. Louis Fed's FRED database. Down is loose:
Coincidentally, in all senses of the word, and with causality working both directions, a week after maximum tightness on October 7, equity markets, here using the Nasdaq because it is so dramatic, but the move happened in all the indices, on October 13 equities bottomed, reversed, an began a scary strong rally:
We saw tax-loss selling from taxable accounts and portfolio "dressing-up" by both institutions and funds into New Year's eve, but with that supply out of the way stocks did what stocks do in a loose environment, they traded higher.
In yesterday's press conference Fed Chair Powell said:
MR. POWELL: So it is important that overall financial conditions continue to reflect the policy restraint that we’re putting in place in order to bring inflation down to 2 percent, and, of course, financial conditions have tightened very significantly over the past year.
—Wall Street Journal transcript Fed Chief Powell’s Postmeeting Press Conference
Which, if you look at the FRED chart is technically true but is also very deceptive.
Here's the Chicago Fed's methodology and latest data on the NFCI.
