Core Viewpoint - The International Monetary Fund (IMF) warns that global markets are overly complacent regarding risks such as trade wars, geopolitical tensions, and significant government deficits, which could lead to a "disorderly" market correction due to overpriced assets [1][4]. Market Conditions - U.S. President Donald Trump's renewed threats to increase tariffs on China have heightened investor concerns about a potential major asset price correction, resulting in a sell-off in U.S. stocks and a decline in bitcoin [2]. - Despite recent volatility, markets have shown resilience since April, supported by expectations of monetary easing in major advanced economies, although this optimism may overlook the risks posed by tariffs and high government debt [3]. Financial System Vulnerabilities - The IMF's Global Financial Stability Report indicates that underlying vulnerabilities are emerging in the financial system, with risk asset prices significantly above fundamental values, raising the likelihood of disorderly corrections during adverse shocks [4]. - Equity and corporate credit valuations are described as "fairly stretched," driven by enthusiasm for AI mega-cap stocks, which could lead to a sudden correction if expected returns do not meet high valuations [5]. Bond Market Analysis - Analysis of sovereign bond markets reveals increasing pressure from widening fiscal deficits, which could affect market functioning. Although bond markets have remained stable, sudden yield increases could strain bank balance sheets and impact open-ended funds like mutual funds [6]. - The term premium for holding longer-term bonds is at levels not seen since before 2009, and it may continue to rise as supply increases, according to the IMF [7].