The European Securities and Markets Authority has published its second 2026 risk monitoring report, warning that elevated technology valuations and renewed investor optimism are increasingly disconnected from persistent inflation, weaker growth and geopolitical tensions. This gap raises the risk of an abrupt market correction. ESMA continues to assess market, contagion and operational risks at its highest level, with the outlook for operational risk rising as frontier artificial intelligence changes the cyber threat landscape. Equities recovered to or above levels preceding the Middle East conflict, while sovereign bond volatility remained elevated and bonds showed less ability to act as safe havens. Crypto assets lost nearly EUR 2 trillion in market value from their October 2025 peak, although growing links with traditional finance could increase spillover risks. Central counterparties handled volatile energy trading without disruption, but settlement failures briefly rose across asset classes in early April. Fund risk indicators remained broadly stable, though valuation, interest rate and credit risks persisted. ESMA also highlighted EU retail investors’ increasing concentration in U.S. equities and their exposure to speculative trading, social media and gamification through digital platforms, advising retail and institutional investors to maintain robust liquidity buffers against sharp corrections.
2026-09-10European Securities and Markets Authority
European Securities and Markets Authority identifies rising correction and cyber risks despite resilient markets
The European Securities and Markets Authority warned that elevated technology valuations and strong investor optimism are increasingly detached from weaker economic conditions and geopolitical risks, raising the prospect of an abrupt market correction. Operational risks are also rising as frontier artificial intelligence intensifies cyber threats, while growing U.S. equity concentration leaves EU investors more exposed to a repricing.