Via Federal Reserve Financial Stability Report

  • Broad range of asset prices could be vulnerable to large & sudden declines
  • Household debt is moderate relative to income
  • large banks' committed credit lines to non-bank financial entities increased in late 2020, reached a record $1.6 trillion by year-end
  • data on margin, securities borrowing suggest hedge fund leverage associated with equities market activity is at high levels
  • most measures of hedge fund leverage increased in the second half of 2020; now above historical averages
  • broker-dealer leverage remained near historically low levels through the fourth quarter of 2020
  • delinquency rates remained unchanged for most types of loans during the second half of 2020, rose for commercial real estate loans
  • commercial and industrial, commercial real estate, residential mortgage loans in loss mitigation remain elevated
  • leverage at banks and broker-dealers remains low; leverage at hedge funds, life insurers remains high
  • adverse developments in emerging market economies spurred by further rise in long-term rates could spill over to united states
  • stresses from lingering pandemic in Europe pose risks to u.s. financial system
  • less-than-anticipated progress on pandemic could pose risks to u.s. financial system
  • gamestop, archegos incidents highlight opacity of risky exposures, need for greater transparency at hedge funds and other leveraged entities
  • concentrated trading of some 'meme' stocks in January led to substantial margin increases on equity trades and equity option positions that challenged some brokers in those markets
  • behavior of 'meme' stocks in early 2021 also indicative of elevated risk appetite
  • elevated equity issuance through spacs suggests a higher-than-typical appetite for risk among equity investor
  • overall credit quality of outstanding bonds has improved since November

The Federal Reserve seems relaxed ... despite some of those points being indicative of potential instabilities brewing.

For the full text, link here.