As global financial markets continue to outpace the economic recovery, European regulators warn that the risk of a sudden equity market correction remains high.
The European Securities and Markets Authority (ESMA) published its first report of the year on the risks facing financial markets, warning that the risk of a drop in equity values remains very high.
“The significant rebound of equity markets and the valuation of debt indices which reached pre-pandemic levels, contrast with weak economic fundamentals,” the report said.
The primary risk from this phenomenon is that the “ongoing decoupling” between financial markets and the economy “leads to a reversal in investor risk assessment and a sudden market correction,” ESMA noted.
In the same report, ESMA also reiterated warnings to consumers about the risks posed by cryptoassets.
The regulators stressed that cryptoassets such as Bitcoin are “highly risky and speculative” and also unregulated, which means they don’t enjoy the same safeguards as traditional, regulated financial services.