GSFCIGoldman Sachs Financial Conditions Index (economic barometer)
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The GSFCI has deteriorated dramatically over the last six quarters, with 40% of its move driven by USD strength.
Although the Goldman Sachs index emphasizes investment grade (IG) spreads, there is a focus on the HY market for two reasons: First, it poses a greater risk for a financial conditions dislocation and is more highly correlated with other stressed areas such as leveraged loans; and second, the HY market has grown substantially since 2000, suggesting the GSFCI is understating the true extent that financial conditions have tightened during recent quarters.
All four components of the GSFCI indicate a significant tightening of financial conditions has already occurred.