{"id":80139,"date":"2025-10-14T15:24:12","date_gmt":"2025-10-14T15:24:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/ie\/80139\/"},"modified":"2025-10-14T15:24:12","modified_gmt":"2025-10-14T15:24:12","slug":"stock-market-concentration-risk-now-higher-than-dot-com-bubble-period-imf-warns-the-irish-times","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ie\/80139\/","title":{"rendered":"Stock market \u2018concentration risk\u2019 now higher than dot-com bubble period, IMF warns \u2013 The Irish Times"},"content":{"rendered":"

Market valuations have \u201cbecome stretched\u201d, increasing the probably of a \u201cdisorderly correction\u201d, the International Monetary Fund (IMF)<\/a> has warned.<\/p>\n

In its latest Global Financial Stability update, published alongside its half-year report on the global economy, the Washington-based fund highlights the concentration risk within the US\u2019s S&P 500 index from the so-called magnificent seven stocks (Alphabet, Amazon, Apple, Microsoft, Meta, Tesla and Nvidia). <\/p>\n

It noted that the information technology sector accounted for a weight of 35 per cent of the total S&P 500, similar to during the dot-com bubble of the 1990s, but this time just seven stocks accounted for 33 per cent of the index. <\/p>\n

That meant the concentration risk \u201cwas now substantially higher than during the dot-com bubble\u201d.<\/p>\n

Many analysts believe stock markets, particularly in the US, are on the brink of major negative correction following an investment glut in artificial intelligence (AI)<\/a>.<\/p>\n

AI-related companies have accounted for around 80 per cent of US stock market gains this year.<\/p>\n

[\u00a0Negative impact of tariffs starting to show, IMF warnsOpens in new window<\/a>\u00a0]<\/p>\n

In its report, the IMF said the rebound in global equity prices since US president Donald Trump\u2019s April tariff announcement had outpaced expected future earnings.<\/p>\n

Despite recent economic data trending negative, markets appear to be downplaying the potential effects of US tariffs <\/a>on growth and inflation, it said.<\/p>\n

Global financial markets \u201chave largely brushed off subsequent shocks and uncertainties,\u201d it said, noting financial conditions across most regions have eased back to \u201caccommodative levels\u201d. <\/p>\n

\"\"Budget 2026: What it means for Irish households and businesses<\/p>\n

But it warned \u201cthe apparent calm masks a degree of complacency.\u201d <\/p>\n

\u201cDespite trade tensions, geopolitical uncertainties, and rising concerns about sovereign indebtedness, asset prices have returned to stretched valuations and financial conditions have broadly eased,\u201d it said.<\/p>\n

\u201cAgainst substantial AI-related investments, the possibility of mega-cap stocks failing to generate expected returns to justify current lofty equity valuations could trigger deterioration in investor sentiment and make the stocks susceptible to sudden, sharp correction,\u201d the IMF said.<\/p>\n

An analysis of sovereign bond markets also highlighted \u201cgrowing pressure from widening fiscal deficits on the functioning of markets,\u201d it said.<\/p>\n

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In advanced economies, sovereign bond markets are increasingly dependent on price-sensitive investors, it said.<\/p>\n

\u201cStress in core bond markets, although a tail risk, could have broad and disruptive ramifications for financial markets, given bonds\u2019 role as key benchmarks and collateral,\u201d it said.<\/p>\n

In its report, the IMF also highlighted the weakness of the US dollar <\/p>\n

\u201cOverall, the dollar has depreciated by about 10 per cent so far this year against major currencies,\u201d it said.<\/p>\n

\u201cAnalysts have put forth a number of possible drivers for dollar weakness, from a revaluation of dollar strength amid concerns over the US fiscal position to a shift in allocation away from US-dollar-denominated assets driven by concerns about US policy uncertainty,\u201d it said.<\/p>\n","protected":false},"excerpt":{"rendered":"Market valuations have \u201cbecome stretched\u201d, increasing the probably of a \u201cdisorderly correction\u201d, the International Monetary Fund (IMF) has…\n","protected":false},"author":2,"featured_media":80140,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[72,61,21326,60,123],"class_list":["post-80139","post","type-post","status-publish","format-standard","has-post-thumbnail","category-markets","tag-business","tag-ie","tag-international-monetary-fund","tag-ireland","tag-markets"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/80139","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=80139"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/80139\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/80140"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=80139"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=80139"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=80139"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}