The European Securities and Markets Authority (ESMA) maintained a stable perception of financial market risk in its latest Q2 report. However, make no mistake: it also considered that the risk level remains very high. What accounts for this elevated risk perception? The report’s preamble is clear: investment fund liquidity, low returns and potential leverage, geopolitical tensions and economic uncertainties….. and the low valuations (from a historical perspective) of banks on the stock market.
Does the previous list of potential risks not tell you anything? Beyond the impact of ‘Brexit’ on investment funds (market shock), assuming that geopolitical risks are here to stay and that there are structural problems limiting potential economic growth, the possible negative consequences derived from an overly expansive monetary policy for too long remain.
