WASHINGTON - U.S. stock prices are “elevated” and business debt is at historic levels, but the financial system overall “appears resilient” with low levels of leverage and less of a destabilizing run in key markets, the Federal Reserve said in its latest report on financial stability.
The ratio of debt to assets among publicly traded, nonfinancial firms is near a 20-year high, the Fed noted, and the share of new loans going to the most indebted companies is near peaks reached in 2014 and just before the 2007 to 2009 financial crisis. The Fed report is the central bank’s latest take on a financial system that went full circle in a matter of months, along the way prompting President Donald Trump to take aim at Fed policy and demand lower interest rates. After stock markets hit record highs early last fall, they plummeted by nearly 20 percent by year’s end, and investors began demanding higher interest rates to hold the bonds of weaker corporations.