A toxic mix of complacency, excessive risk-taking and market exuberance in financial markets is raising risks of a market correction, the International Monetary Fund said Wednesday.
Underlying their risky bets, investors seem uniform in their belief that interest rates are going to be low as far as the eye can see.
“A sense of complacency appears to be permeating markets,” said Tobias Adrian, the director of the IMF’s Monetary and Capital Markets Department, in a blog post accompanying the international agency’s latest Global Financial Stability report.
Financial markets have shrugged off the most recent softening of economic activity, the IMF report noted. At the same time, asset valuations appear to be stretched in several sectors.
“For example, in the tech sector, we’re detecting some frothiness,” Adrian said during a question-and-answer session following the publication of the report.