Financial market risks — real, but may be overstated

Concerns have risen about financial market risks, centering around elevated asset valuations and high corporate debt, according to Oxford Economics. A lack of corporate distress and low interest rates suggest no cause for panic. But a growth scare or a rise in bond yields — perhaps due to higher inflation — could change the picture.

Standard equity valuations are in the top 1 percent seen in the past 150 years, and there has also been a surge in M&A activity in recent quarters involving highly leveraged deals. Corporate debt in the advanced economies has soared since early 2020, and U.S. high-yield debt issuance is at record levels.

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