In the context of the stress test, what type of asset is primarily affected if there is a 36% drop?

In the context of the stress test, a 36% drop primarily affects US home prices. This is because stress tests often simulate a significant economic downturn, which would lead to a decrease in housing demand and value. A drop of this magnitude reflects how the housing market may react to broader economic challenges, such as rising interest rates, high unemployment rates, or reduced consumer confidence.

US home prices are especially sensitive to these factors, as they are influenced by mortgage rates, buyer affordability, and overall economic health. During a stress test scenario, the dramatic decline suggests that many homeowners may find themselves with negative equity, motivating foreclosures and further depressing prices.

While commercial real estate and corporate equities could also be impacted by such economic stress, the specific mention of a 36% drop aligns most closely with the typical behavior of residential housing markets under severe financial duress, making it the most affected asset class in this scenario. Government bonds, on the other hand, often remain stable or may even appreciate during such downturns as investors seek safer assets.