Global markets are facing increased risks of a disorderly correction, warns the IMF. President Trump’s tariff threats on China sparked a sell-off, despite markets being mostly resilient. The IMF highlights overpriced assets and warns of potential damage from tariffs and high government debt. Central banks must remain alert to inflation risks and maintain independence.

Analysis shows asset prices are well above fundamentals, increasing the risk of a sharp correction. Sovereign bond markets face pressure from widening fiscal deficits. The IMF warns of interconnectedness between banks and nonbank financial firms, amplifying shocks. Urgent fiscal adjustments are needed to ensure resilient bond markets and curb deficits.

Nonbank financial firms pose contagion risks, holding roughly half of the world’s financial assets. Vulnerabilities in the sector could transmit to the banking system, complicating crisis management. Policymakers must adopt a comprehensive approach to assess these risks and address interactions between banks and nonbanks. Governments must also respond to crypto assets to prevent disruption to the traditional banking system.

Read more at Yahoo Finance: IMF warns of rising odds of a ‘disorderly’ global market correction