Financial Stability Report

April 25, 2025-A summary of the developments in the four broad categories of vulnerabilities since the November 2024 Financial Stability Report (FSR) is as follows:
1. Asset valuations. Asset valuations are notable. Prior to early April's market volatility, the ratio of equity prices to earnings had remained near the high end of its historical range and an estimate of the equity premium-the compensation for risk in equity markets-remained well below average.

Even after recent declines in equity prices, prices remained high relative to analysts' earnings forecasts, which adjust more slowly than market prices.

Treasury yields across maturities remained at the higher end of their levels since 2008. Spreads between yields on corporate bonds and those on comparable-maturity Treasury securities were at moderate levels compared to their history, despite recent increases. Liquidity across many financial markets remained low through the end of March and deteriorated further in April, but market functioning was generally orderly. In U.S. property markets, home prices remained elevated, and the ratio of house prices to rents continued to be near the highest levels on record.

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Source: federalreserve.gov