US stock markets are at risk of sharp falls, warns IMF

US stock markets riding high in the AI boom are at risk of a “sudden, sharp correction” while government bond markets are under growing pressure, the International Monetary Fund warned yesterday.

- Heather Stewart Washington Kalyeena Makortoff

In a global financial stability report, published as policymakers gathered in Washington for the IMF’s annual meetings, the fund said markets appeared “complacent”.

The IMF highlighted “increasing vulnerabilities in the financial system,” including in stock and bond markets and among “non-bank financial intermediaries” (NBFIs).

Although US stock markets have roared to record highs, the IMF said stocks did not appear as overvalued as they were during the dotcom bubble at the turn of the millennium.

Instead, it said the gains were worryingly concentrated among the “magnificent seven” tech firms, including Apple, Nvidia and Meta.

“Concentration risk within the S&P 500 is at a historic high, with a narrow group of stocks spanning mega-cap IT and AI-related firms driving the broader index,” it said, with the seven accounting for 33% of the index.