Another bad news for the US stock market! Federal Reserve officials are becoming increasingly cautious about the stock market's rise.

After experiencing a strong rise in the US stock market and a significant recovery in the real estate market in recent months, Federal Reserve officials have become increasingly vigilant about the risks posed by rising asset prices to financial stability. According to the minutes of the Federal Reserve meeting released on Wednesday, officials at the July FOMC policy meeting noted that stock prices had generally risen and corporate bond spreads had narrowed, putting "significant" pressure on asset valuations. This assessment is higher than the "moderate" risk assessment in May. Federal Reserve officials also mentioned residential and commercial real estate prices, describing them as "relatively high" compared to fundamentals. The minutes of the meeting pointed out that housing prices have started to rise again, with the price-to-rent ratio approaching levels seen before the mid-2000s subprime mortgage bubble burst. While commercial real estate prices have already declined, the increase in remote work may indicate further significant declines in this type of asset in the future. In the discussions on financial stability risks in July, Federal Reserve policymakers also highlighted the danger that "a significant decline in commercial real estate valuations could have adverse effects on some other financial institutions, such as banks and insurance companies." At every other FOMC meeting, Federal Reserve staff provide policymakers with a detailed assessment of financial vulnerabilities, which is separate from the quarterly Summary of Economic Projections (SEP). In other words, the SEP is usually released at meetings in March, June, September, and December, while the assessment of financial vulnerabilities is released at the remaining four meetings each year. When trying to identify the risks facing financial stability, the Federal Reserve primarily focuses on several variables, including the health of the banking system, leverage in the economy, and asset price valuations. When these prices are inflated and deviate from fundamentals, the Federal Reserve is concerned that a sudden or significant decline in prices could disrupt the functioning of the financial system and harm the economy. The dot-com bubble in 2000 and the subprime crisis in 2008 are well-known examples. For example, in 2008, the bursting of the housing bubble led to the most severe recession since the Great Depression, prompting the Federal Reserve to strengthen its monitoring of financial stability risks. As of now, the peak of the US stock market occurred in July, around the time of the July Federal Reserve meeting. The S&P 500 index rose more than 20% for the year, and the Nasdaq 100 index rose more than 45% at one point. However, since then, due to the impact of second-quarter reports and the surge in US bond yields, US stocks have experienced a significant decline. The Nasdaq 100, which had the strongest momentum, may have fallen for three consecutive weeks, but its year-to-date gain is still considerable. Last month, existing home sales, which account for 90% of the US real estate market, showed that the median home price in June reached the second-highest level in history, only slightly lower than the record high in June of last year, by about 1%. Inventory is at its lowest level ever recorded for the same period.