The International Monetary Fund said markets have grown complacent despite lingering trade tensions, as risks to global financial stability remain elevated.
In its latest Global Financial Stability Report, released on Tuesday, the fund said asset prices had returned to stretched valuations after a volatile period in April, following US President Donald Trump's sweeping tariff announcement.
“Complacency basically refers to the observation that markets are shrugging off the broader level of uncertainty that commentators, analysts, economists … point to,” said Tobias Adrian, director of the IMF's monetary and capital markets department.
Global financial stability risks have receded only modestly since April, the fund said in its report. It warned risk asset prices are well above fundamentals and could lead to disorderly corrections in the event of adverse shocks.
Since a broad global sell-off in April, US markets have reached record highs. The S&P 500 and tech-heavy Nasdaq Composite are up about 13 per cent and 17 per cent this year, respectively, while the Dow Jones is up about 9 per cent.
European markets have rebounded similarly, with the Europe Stoxx 600 up roughly 11 per cent this year. Meanwhile, emerging markets have been outperforming US equities partly because of a weaker dollar.
Complacency basically refers to the observation that markets are shrugging off the broader level of uncertainty that commentators, analysts, economists … point to
Tobias Adrian,
IMF monetary and capital markets department
US-China trade tension flared again ahead of the IMF and World Bank annual meetings in Washington, as Mr Trump threatened to impose new tariffs on Beijing after it announced plans to impose strict export controls on rare earth minerals.
Wall Street rebounded on Monday after a sell-off on Friday, after Mr Trump softened his tone on China on Sunday. “But the magnitude was fairly contained relative to say what we saw in April,” Mr Adrian said.
He added that he was surprised by the resiliency that markets, particularly among emerging economies, have shown this year.
“Capital markets really have played a role as a shock absorber relative to all kinds of policy announcements," he said. "That's a very good development, right?”
Mr Adrian said he saw no reason for the resiliency to stop, pointing to strong global regulation of banks and non-banks. However, he said the fund remained concerned about the longer-term debt of countries, with the fund projecting total debt-to-GDP to rise to about 100 per cent of GDP over the next two years, which could place pressure on global capital markets.
AI growth
Strong performance in the US this year has largely been linked to growing investment in artificial intelligence, with hundreds of billions of dollars being poured into infrastructure and AI-related projects.
Rising valuations have led analysts to compare the AI surge to the dotcom bubble of the 1990s that burst when many internet-based companies whose investments propelled market gains failed.
Mr Adrian said that, unlike the dotcom era, the tech companies driving the AI boom are hugely profitable. “So in that sense, it's not a bubble, it is actual profits, and they feed into aggregate macro activity,” he said. “Of course, profitability going forward could disappoint, but today that has surprised to the upside. And so it's a different conservation, really.”
He added that price-earnings ratios are relatively stretched, with the fund assessing it is about 10 per cent overvalued compared to its estimated overvaluation of 20 per cent in 1999.
Mr Adrian said the direct financial stability implication of a readjustment of tech stocks would likely be limited if profitability expectations are not realised in the future, noting many investments in AI have been cash or equity funded. "There's some leverage, but it's fairly contained,” he said.
However, there could be larger implications for the macroeconomic picture. One JP Morgan analysis suggests AI-related capital expenditures contributed to 1.1 per cent to GDP growth in the US the first half of this year, outpacing the consumer as the driver behind economic growth.
“Real investment in data centres and other technology-related investments, at this point, make up the entire investment of the US economy,” Mr Adrian said. "So there's a pronounced sectoral shift in terms of investment behaviour. And so how that unfolds, I think, will be important to watch.”
More coverage from the Future Forum
KILLING OF QASSEM SULEIMANI
Wicked: For Good
Director: Jon M Chu
Starring: Ariana Grande, Cynthia Erivo, Jonathan Bailey, Jeff Goldblum, Michelle Yeoh, Ethan Slater
Rating: 4/5
Three ways to limit your social media use
Clinical psychologist, Dr Saliha Afridi at The Lighthouse Arabia suggests three easy things you can do every day to cut back on the time you spend online.
1. Put the social media app in a folder on the second or third screen of your phone so it has to remain a conscious decision to open, rather than something your fingers gravitate towards without consideration.
2. Schedule a time to use social media instead of consistently throughout the day. I recommend setting aside certain times of the day or week when you upload pictures or share information.
3. Take a mental snapshot rather than a photo on your phone. Instead of sharing it with your social world, try to absorb the moment, connect with your feeling, experience the moment with all five of your senses. You will have a memory of that moment more vividly and for far longer than if you take a picture of it.
So what is Spicy Chickenjoy?
Just as McDonald’s has the Big Mac, Jollibee has Spicy Chickenjoy – a piece of fried chicken that’s crispy and spicy on the outside and comes with a side of spaghetti, all covered in tomato sauce and topped with sausage slices and ground beef. It sounds like a recipe that a child would come up with, but perhaps that’s the point – a flavourbomb combination of cheap comfort foods. Chickenjoy is Jollibee’s best-selling product in every country in which it has a presence.
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
The specs
Engine: 2.0-litre 4cyl turbo
Power: 261hp at 5,500rpm
Torque: 405Nm at 1,750-3,500rpm
Transmission: 9-speed auto
Fuel consumption: 6.9L/100km
On sale: Now
Price: From Dh117,059
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
COMPANY%20PROFILE
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A Prayer Before Dawn
Director: Jean-Stephane Sauvaire
Starring: Joe Cole, Somluck Kamsing, Panya Yimmumphai
Three stars
ICC Awards for 2021
MEN
Cricketer of the Year – Shaheen Afridi (Pakistan)
T20 Cricketer of the Year – Mohammad Rizwan (Pakistan)
ODI Cricketer of the Year – Babar Azam (Pakistan)
Test Cricketer of the Year – Joe Root (England)
WOMEN
Cricketer of the Year – Smriti Mandhana (India)
ODI Cricketer of the Year – Lizelle Lee (South Africa)
T20 Cricketer of the Year – Tammy Beaumont (England)
Illegal%20shipments%20intercepted%20in%20Gulf%20region
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TECH%20SPECS%3A%20APPLE%20WATCH%20SERIES%208
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Groom and Two Brides
Director: Elie Semaan
Starring: Abdullah Boushehri, Laila Abdallah, Lulwa Almulla
Rating: 3/5
Red flags
- Promises of high, fixed or 'guaranteed' returns.
- Unregulated structured products or complex investments often used to bypass traditional safeguards.
- Lack of clear information, vague language, no access to audited financials.
- Overseas companies targeting investors in other jurisdictions - this can make legal recovery difficult.
- Hard-selling tactics - creating urgency, offering 'exclusive' deals.
Courtesy: Carol Glynn, founder of Conscious Finance Coaching
The candidates
Dr Ayham Ammora, scientist and business executive
Ali Azeem, business leader
Tony Booth, professor of education
Lord Browne, former BP chief executive
Dr Mohamed El-Erian, economist
Professor Wyn Evans, astrophysicist
Dr Mark Mann, scientist
Gina MIller, anti-Brexit campaigner
Lord Smith, former Cabinet minister
Sandi Toksvig, broadcaster
More from Neighbourhood Watch
The biog
Name: Timothy Husband
Nationality: New Zealand
Education: Degree in zoology at The University of Sydney
Favourite book: Lemurs of Madagascar by Russell A Mittermeier
Favourite music: Billy Joel
Weekends and holidays: Talking about animals or visiting his farm in Australia
The%20specs
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BLACK%20ADAM
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Know before you go
- Jebel Akhdar is a two-hour drive from Muscat airport or a six-hour drive from Dubai. It’s impossible to visit by car unless you have a 4x4. Phone ahead to the hotel to arrange a transfer.
- If you’re driving, make sure your insurance covers Oman.
- By air: Budget airlines Air Arabia, Flydubai and SalamAir offer direct routes to Muscat from the UAE.
- Tourists from the Emirates (UAE nationals not included) must apply for an Omani visa online before arrival at evisa.rop.gov.om. The process typically takes several days.
- Flash floods are probable due to the terrain and a lack of drainage. Always check the weather before venturing into any canyons or other remote areas and identify a plan of escape that includes high ground, shelter and parking where your car won’t be overtaken by sudden downpours.
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Timeline
2012-2015
The company offers payments/bribes to win key contracts in the Middle East
May 2017
The UK SFO officially opens investigation into Petrofac’s use of agents, corruption, and potential bribery to secure contracts
September 2021
Petrofac pleads guilty to seven counts of failing to prevent bribery under the UK Bribery Act
October 2021
Court fines Petrofac £77 million for bribery. Former executive receives a two-year suspended sentence
December 2024
Petrofac enters into comprehensive restructuring to strengthen the financial position of the group
May 2025
The High Court of England and Wales approves the company’s restructuring plan
July 2025
The Court of Appeal issues a judgment challenging parts of the restructuring plan
August 2025
Petrofac issues a business update to execute the restructuring and confirms it will appeal the Court of Appeal decision
October 2025
Petrofac loses a major TenneT offshore wind contract worth €13 billion. Holding company files for administration in the UK. Petrofac delisted from the London Stock Exchange
November 2025
180 Petrofac employees laid off in the UAE
