Federal Reserve Assessment: Financial System Vulnerability Significant, Asset Valuation Pressure High

[Chain News] PANews reported on August 21 that the Federal Reserve released the minutes from its July meeting, which mentioned that staff conducted the latest assessment of the stability of the U.S. financial system. Overall, the financial vulnerabilities of this system are still described as "significant." The staff judged that asset valuation pressures are at high levels. In the stock market, price-to-earnings ratios are at the upper end of their historical distribution; the spread on high-yield corporate bonds has narrowed significantly and is at a low level compared to its historical distribution. Housing valuations have slightly declined but remain high. Vulnerabilities related to non-financial corporate and household debt are described as "moderate." The ratio of household debt to GDP is at its lowest level in the past 20 years, and household balance sheets remain robust. The debt repayment capacity of listed companies remains strong. In terms of private enterprises, debt is growing rapidly, while the interest coverage ratio for these companies has fallen to a lower range of its historical distribution, indicating that vulnerabilities in this sector may be intensifying.