Stock Market “Correction” Feared as Report Flags “Stretched Valuations”

Amid a surprisingly resilient global economy, a top financial watchdog has issued a stark warning about the stability of the world’s stock markets. The institution’s latest outlook describes market valuations as “stretched,” raising fears of a potential “correction” that could derail recent growth, particularly if the buzz around artificial intelligence subsides.
The report notes that investment in data centers and AI has been a significant contributor to economic expansion recently. However, if investors begin to reassess the technology’s immediate profitability, the subsequent drop in share prices could cause a “rather sharp” decline in overall investment, creating a significant economic shockwave.
This market risk is just one of several clouds hanging over an economy that, on the surface, appears healthy, with the global growth forecast for this year revised up to 3.2%. The report cautions that this number is misleading, as the full, negative impact of US trade tariffs has been delayed and is still expected to hit business investment hard over the coming year.
The United Kingdom’s economic picture is also complex. It has seen its growth forecast for this year rise to 1.3%. Yet, it is also predicted to have the G7’s highest rate of inflation over the next two years, reaching 3.4% in 2025. This has led to strong advice for its central bank to delay any potential interest rate cuts.
Furthermore, the report identifies restrictive immigration policies as another major economic headwind. The US, in particular, is warned that its current approach could reduce its GDP by up to 0.7% and cause inflationary spikes in sectors like hospitality and agriculture, which are heavily reliant on immigrant labor.