Ongoing geopolitical and economic vulnerabilities masked by strong investor optimism

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The European Securities and Markets Authority (ESMA) warned in its latest risk monitoring report that high investor optimism and elevated technology valuations are masking deteriorating macro-financial conditions and geopolitical risks. The regulator stated that this disconnect increases the risk of abrupt market corrections if sentiment shifts. ESMA also highlighted emerging vulnerabilities linked to frontier AI, interconnected crypto-asset markets, and private credit exposures.