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Fed Warns Assets Face Big Declines If Virus Goes Unchecked

  • Uncertainty remains elevated, says financial stability report
  • Leverage at hedge funds, life insurers still at high levels
A Covid-19 Intensive Care Unit at a hospital in Houston, Texas on Nov. 8.
A Covid-19 Intensive Care Unit at a hospital in Houston, Texas on Nov. 8.Photographer: Go Nakamura/Bloomberg
Updated on

The Federal Reserve is warning that asset prices in key markets could still take a hit if the coronavirus pandemic’s economic impact worsens in coming months.

Most assets have maintained strong levels so far, as investor appetites increased and the government intervened to support the financial system, according to the Fed’s twice-yearly Financial Stability Report released Monday. Signs of weakness are showing in commercial real estate -- which has been particularly sensitive to the pandemic -- where property values have begun falling, according to the report.