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#1 16-02-2022 18:50:38

johnedward
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From: Paris - France
Registered: 21-12-2009
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The ESMA is worried about the upcoming market correction

The ESMA is worried about the upcoming market correction


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The European Securities and Markets Authority (ESMA) issued a risk monitoring report yesterday, raising fears of a market correction soon due to high risks among institutional and retail investors.

Overall, macroeconomic conditions continued to improve throughout the second half of last year. However, the recovery in financial markets within the European Union has slowed due to the resurgence of the virus situation at the end of last year, which had an impact on market growth and expectations.

The agency stresses that there is room to reduce risk levels if past improvements in the economic environment and relatively low market volatilities prove resilient.

The agency is also concerned about the impact of growing geopolitical tensions in Eastern Europe, which are causing market jitters. In addition, rising inflation in the US and EU is having an impact on monetary policy expectations.

However, ESMA justified its prediction of a possible sharp market correction by citing the fact that there have already been two news-related sell-offs in the market in the second half of 2021. In addition, stock markets securities are overvalued due to high price-earnings ratios, although volatility has been contained.

Risks of a sharp correction

"All investors should consider that the risk of a market correction remains acute. This manifested itself last year in two episodes of short selling largely driven by news related first to Evergrande and then to the resurgence of the virus. Markets remain highly volatile and ESMA sees growing uncertainty for investors going forward," said ESMA Chair Verena Ross.

"Retail investors are a particular concern for ESMA. Their participation in financial markets has increased significantly in recent years, with new investors taking advantage of the convenience and user-friendly features of mobile trading platforms. also comes with risks, and ESMA remains concerned about the risks faced by investors who buy assets hoping for significant price growth, and without realizing the high risks they are running."

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