According to the estimates provided by the Bank for International Settlements, at the moment, most assets are overestimated. The jump in stock markets could be explained by the successful development of the vaccines against coronavirus and the recent US presidential election.
In its quarterly report, BIS notes that global stock and credit markets have exceeded pre-crisis levels. Even the coronavirus pandemic failed to halt the uptrend. Analysts emphasize the correlation between the price of risk assets and global economic prospects. Claudio Borio, Head of the Monetary and Economic Department, said that “questions about overstretched valuations” had been present even before the coronavirus crisis.
Analysts are wary of the situation in the corporate credit market. “We are moving from the liquidity to the solvency phase of the crisis,” Borio explained. By the time, the global pile of negative-yielding debt has swollen to 17.5 trillion. As a result, investors who want to make money are switching to riskier assets. Under these conditions, experts at BIS are calling on regulators to continue supporting economies. They are sure that this strategy will help to cope with the virus-induced crisis.
