Tags: federal reserve | invest | risks | real estate

Fed Report Cites Risks in ETFs and Real Estate Markets

Tuesday, 24 Feb 2015 06:25 AM

Federal Reserve officials said emerging risks in financial markets include misperceptions of liquidity of exchange-traded funds, declining credit standards in some loan markets and high valuations in commercial real estate.

The Fed judged that financial risks overall have moderated while it pointed to possible hazards in specific markets. The Fed warned of the risk of fire sales and runs in some mutual-fund products.

“As mutual funds and ETFs may appear to offer greater liquidity than the markets in which they transact, their growth heightens the potential for a forced sale in the underlying markets if some event were to trigger large volumes of redemptions,” the Federal Reserve Board said in its semi-annual report to Congress.

The Fed warned of the potential for runs on prime money market funds with fixed net asset values if the price of the securities they hold falls.

While enforcement has helped improve the quality of high-yield, high-risk loans, new deals continue to show signs of “weak underwriting terms and heightened leverage.”

The Fed Board discussed economic trends elsewhere in the report, noting that productivity growth has been held down by “the sharp drop in businesses’ capital expenditures over the recession and the moderate recovery in expenditures since then.”

The report said the percentage of the population participating in the workforce has stopped declining, reflecting some improvement in the job market. Still, the low rate of participation “continues to suggest more cyclical weakness than is indicated by the unemployment rate.”

The report also discussed the global impact of falling oil prices. While oil-producing countries will suffer losses, “the overall effect on global economic activity is likely to be stimulative in the near term” because consumers are likely to increase spending on other goods and services more than producers cut back.

© Copyright 2017 Bloomberg News. All rights reserved.

   
1Like our page
2Share
InvestingAnalysis
Federal Reserve officials said emerging risks in financial markets include misperceptions of liquidity of exchange-traded funds, declining credit standards in some loan markets and high valuations in commercial real estate.The Fed judged that financial risks overall have...
federal reserve, invest, risks, real estate
294
2015-25-24
Tuesday, 24 Feb 2015 06:25 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved