Fed governor Lael Brainard, in a statement released with the report, referred to an “elevated” appetite for risk, citing the “meme stock” episode – presumably a reference to the GameStop debacle – as an example.

It isn’t only equity markets where prices are “near the top of their historical distribution,” with Brainard saying corporate bond markets were also seeing elevated risk appetite and that the spreads of lower-quality speculative-grade bonds relative to Treasury yields were among the “tightest” the Fed had seen historically.

She said the failure of Archegos Capital Management – the “family office” that blew up earlier this year, showering billions of losses on some of the world’s largest banks – highlighted the potential for non-bank institutions like hedge funds and other leveraged investors to generate large losses within the financial system.

“The Archegos event illustrates the limited…

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