The Federal Reserve Bank of Kansas City has been evaluating financial stress for over 23 years. According to their latest news release on November 8th, 2013, they stated that the Kansas City Financial Stress Index (KCFSI) indicates that financial stress remains low (below historical average). In fact, the index has had 21 consecutive months of below average financial stress.
The Kansas City Financial Stress Index is a monthly composite index of 11 variables reflecting stress in the U.S. financial system. These variables fall into two broad categories – average yield spreads, and measures based on the actual or expected behavior of asset prices.
While the Kansas City Financial Stress Index does not evaluate all measurements, a below average stress level has historically been positive for the U.S. equity markets.