Global markets have become too optimistic about risks such as trade wars, geopolitical tensions and large budget deficits, the International Monetary Fund (IMF) warned in its semi-annual Global Financial Stability Report, published on Wednesday. Combined with already expensive asset prices, it said a “chaotic” market correction was becoming more likely. (2025 Reuters/Benoit Tessier)
[ワシントン １４日 ロイター] – Global markets have become too optimistic about risks such as trade wars, geopolitical tensions and large fiscal deficits, the International Monetary Fund (IMF) said in its semi-annual Global Financial Stability Report, published on Wednesday. Combined with already expensive asset prices, this raises the possibility of a “disorderly” market correction.
“Below the benign surface, the ground is shifting in multiple parts of the financial system, creating vulnerabilities.” “Valuation models show that risk asset prices are significantly above their fundamentals, increasing the probability of a chaotic correction in the event of a negative shock.”
Despite some negative economic data, stock and corporate bond valuations remain “fairly expensive,” he said, adding that the enthusiasm for large-cap AI stocks is causing historic stock market concentration.
It said there was a risk of a “sudden and sharp correction” if high valuations were not justified by expected returns.
Analysis of the government bond market also shows that the widening fiscal deficit is putting pressure on market functioning.
So far, the bond market has been largely stable, but a spike in yields could strain banks’ balance sheets and put pressure on open-end funds like mutual funds, he said.
Tobias Adrian, the IMF’s director of financial and capital markets, warned at a news conference in Washington on Wednesday that term premiums — the risk premium investors demand when holding long-term bonds instead of rolling them over short-term ones — have reached pre-2009 levels. He said prices could continue to rise as supply increases.
“While financial conditions are accommodative, macro financial risks remain,” Adrian said.
The IMF said central banks must remain vigilant about the inflation risks associated with tariffs and should take a cautious approach to monetary easing to minimize further spikes in the valuations of risky assets.
He added that central bank independence is “critically important” for stabilizing market expectations and fulfilling central bank obligations. He also called for “urgent fiscal adjustments” to curb the budget deficit and maintain a strong bond market.
Banks are becoming more interconnected with less regulated non-bank financial institutions, and shocks arising from sectors such as private credit and crypto assets will be amplified, he said.
The IMF has long warned of uneven supervision of non-bank financial institutions such as insurance companies, pension funds and hedge funds, but the new report warns that non-bank financial institutions have continued to expand and now hold about half of the world’s financial assets. In the United States and Europe, many banks have exposure to nonbank financial institutions that exceeds their high levels of loss-absorbing capital, it said.
If nonbank financial institutions were to draw down all their credit lines, about 10% of U.S. banks and 30% of European banks would see a significant hit to their capital, according to an IMF analysis.
“Vulnerabilities in the non-bank sector are interconnected” and “can quickly propagate to the core banking system, amplifying shocks and complicating crisis management.”
He also called on governments around the world to take comprehensive policy responses to crypto assets, including stablecoins. The introduction of crypto assets threatens to weaken governments’ control over their currencies and disrupt traditional banking systems.
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