Is high valuation justified and sustainable? Can the market rally continue to stretch? After the sell-off in recent days, market sentiment has somewhat changed, some investors even became more bearish about the outlook. Albeit the strong economy is supportive for the financial market, but the stubborn inflation makes the Fed policy path become more uncertain, rates cuts are by no means a sure thing. Amid this kind of environment, high valuation is increasingly becoming the fragility factor of the markets.
The IMF recently released its World Economic Outlook, in which it upgraded its global growth forecast slightly, saying the economy had proven “surprisingly resilient”.
It now sees global growth at 3.2% in 2024, however it noted that downside risks remain, including regarding inflation and the increasingly uncertain path forward for interest rates.
The Outlook also indicated that high corporate valuations could pose a significant risk to financial stability as market optimism becomes untethered from fundamentals.
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