On Friday local time, the Federal Reserve released its semi-annual Financial Stability Report, which clearly reflected the U.S. financial market’s extreme disapproval of certain behavior.
In the report’s “Financial Stability Prominent Risk Survey” survey, as many as 73% of respondents listed “global trade risks” as their top concern—more than double the percentage in last November’s report. At the same time, half of the respondents expressed concern about “policy uncertainty.” “U.S. Government Debt Sustainability,” which topped the list in last year’s report, fell to third place.
This is also the first Financial Stability Report released by the Federal Reserve since Trump returned to the White House earlier this year, and it underscores the impact of the U.S. president’s unpredictable governance.
The report noted: “Changes in trade policy emerged as the most cited risk in this round of surveys… Respondents believe that an escalation in trade tensions could lead to more severe consequences.”
Notably, the Federal Reserve clarified that most of the surveyed scholars, investors, and financial professionals had submitted their responses before Trump announced reciprocal tariffs on April 2. Since then, the U.S. financial market has descended into turmoil, leaving many traders lamenting that daily market swings hinge on whatever Trump and his allies decide next.
Respondents also pointed out that shifts in U.S. government spending priorities and the “level of U.S. involvement in international affairs” are key drivers of policy uncertainty.
In light of the market volatility exacerbated by Trump’s policies, the Federal Reserve noted in the report that relatively stable financial conditions had partially offset the White House’s negative impact.
The report indicated that commercial real estate prices are now showing “some signs of stabilization.” Previously, post-pandemic price declines had made commercial real estate one of the Fed’s biggest concerns.
At the same time, the Fed stated that despite liquidity-related pressures in the stock and Treasury markets in early April, both markets “continued to function in an orderly manner.”
However, the report cautioned that even after April’s sell-off, asset valuations remained elevated, and housing prices stayed high. It also warned that hedge fund leverage ratios were at or near historic highs—though it noted these ratios could decline following the market downturn in early April.
#fed #federalreserve #markets #stockmarket #marketwatch #tariffs #inflation #trump #trumpflation