The FVI shows that we are at heightened vulnerability in the economy, even with stronger growth. The FVI is perhaps a better indicator of the future than current GDP estimates, which are, at best, concurrent and, at worst, lagging. The hope is that GDP is gaining momentum. Unfortunately, this useful tool is only calculated through the first quarter of 2026.
What is useful is that FVI can be broken into four subindices: valuation, funding, financial leverage, and household and business borrowing. Household and business borrowing looks to be under control. It is the government borrowing that is problematic. Funding risks have moved up quickly but have not reached elevated levels. Nevertheless, valuation and leverage levels are at extremes. My guess, without replicating the work, is that the subindex values have all moved higher given the current increases in interest rates.
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