Stock market today: S&P 500 falls as government shutdown, trade jitters persist
Investing.com -- Global markets are becoming excessively comfortable with significant risks that could trigger a "disorderly" market correction, the International Monetary Fund cautioned in its semiannual Global Financial Stability Report released Tuesday.
The IMF noted that despite periodic volatility, markets have shown resilience since April when trade war tensions escalated. This stability has been largely supported by expectations of monetary easing across major advanced economies.
"Beneath the calm surface, the ground is shifting in several parts of the financial system, giving rise to vulnerabilities," the IMF stated in its report.
The organization highlighted that current risk asset prices significantly exceed fundamental values according to valuation models, which increases the likelihood of disorderly corrections when adverse shocks occur.
The IMF identified several key concerns including trade wars, geopolitical tensions, and expanding government deficits. It also warned that the interconnections between traditional banks and less-regulated financial institutions could amplify these risks.
Equity and corporate credit valuations remain "fairly stretched" despite some negative economic indicators, with enthusiasm for artificial intelligence mega-cap stocks driving historic market concentration. This creates the potential for a "sudden, sharp correction" if expected returns fail to justify current high valuations, according to the report.