One of the more striking – if underreported – developments last week, was stalwart dove Lael Brainard turning what, for her, counts as hawkish at an event in New York. 

The similarities between her comments and those that emanated from Jerome Powell during his first testimony on Capitol Hill as Fed Chair were notable. Specifically, she parroted the “headwinds become tailwinds” line and she also seemed to confirm that Fed risk is now skewed definitively to the upside.

The problem – if that’s what you want to call it – with the whole “headwinds become tailwinds” narrative is pretty clearly that we’re already late cycle, so it’s not really clear that we need any more “tailwinds.” In fact, the fiscal “tailwind” that Trump created by piling expansionary fiscal policy atop an economy operating at full employment now threatens to pull forward the end of cycle.

But as Goldman writes in a new note out over the weekend, the risk of that may be overstated. To wit:

In the classic post-war recession model, overheating leads to rapid wage growth and sometimes commodity price spikes, inflation rises quickly, and the Fed tightens abruptly. But it has been a while since a recession of that type last occurred. Today, with inflation expectations well-anchored and energy prices moderated by shale, the risk of runaway inflation appears less threatening than a raw reading of history might suggest.

Instead, Goldman focuses on something Powell said last year – namely that downturns are now more likely to be catalyzed by the unwind of egregious financial excesses.

In order to get a read on that, Goldman draws on previous academic work as well as Treasury and Fed’s research to build a “financial risk monitor” that incorporates measures of valuation, risk appetite (in one category) and financial imbalances and vulnerabilities (in another). Here, in brief, is what’s included: