‘Divergence raises the spectre of another correction in risk asset prices should investors' attitude change’Recent gains in global financial markets despite the coronavirus downturn's “huge” economic uncertainties are a potential threat to the recovery if investors abruptly change their minds, the IMF cautioned on Thursday.
“Investors seem to be betting that lasting strong support from central banks will sustain a quick recovery even as economic data point to a deeper-than-expected downturn,” said Tobias Adrian, director of the IMF's monetary and capital markets department. Debt and equity markets retreated sharply in the early weeks of the pandemic, but have since regained much of the lost ground and the gap between the value and current price has hit “historic highs” in advanced economies, according to IMF staff calculations.