Fed Warns of Peril for Asset Prices as Investors Gorge on Risk

(Bloomberg) — A rising appetite for risk across a variety of asset markets is stretching valuations and creating vulnerabilities in the U.S. financial system, the Federal Reserve said in its semi-annual financial stability report.“Vulnerabilities associated with elevated risk appetite are rising,” Fed Governor Lael Brainard, the head of the Board’s financial stability committee, said in a statement accompanying the report released Thursday. “The combination of stretched valuations with very high levels of corporate indebtedness bear watching because of the potential to amplify the effects of a re-pricing event.”In this environment, prices may be vulnerable to “significant declines” should risk appetite fall, the Fed report noted.Brainard and the report mentioned losses at banks stemming from dealings with Archegos Capital Management, and the…

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