CEA Warns ‘Easy Money Era’ is Masking Global Market Risks, Flags Rapid Rise in Banks’ Assets
The era of easy money is masking global market risks as banks’ and financial institutions’ assets expand rapidly, CEA warned during the Economic Survey briefing.
Chief Economic Adviser V Anantha Nageswaran has warned that the long period of easy money in global markets is masking serious financial risks, as banks and non-bank financial institutions continue to accumulate large amounts of assets.
Speaking at the Economic Survey 2026 press briefing, Nageswaran said global financial markets may not be reflecting the real level of economic uncertainty that has built up over the past several years. He said prolonged low interest rates and abundant liquidity have pushed asset prices higher, even as risks in the global economy remain.
The CEA pointed to high equity valuations as a sign of stress. He said the Shiller price-to-earnings ratio of the S&P 500 is close to a 26-year high, indicating that stock prices have moved far ahead of long-term earnings trends. Such stretched valuations, he warned, make markets vulnerable to sudden corrections.
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Nageswaran also flagged concentration risk in global equity markets. He said the share of the top 10 companies in the S&P 500 has increased sharply over time. This means a small group of firms now carries a large weight in the market. Any shock affecting these companies, he said, can spread quickly across the financial system.
Another key concern raised by the CEA was the rapid growth of global financial assets. He said assets held by banks and non-bank financial institutions have expanded at a fast pace in recent years. This expansion increases the risk of sharp and destabilising unwinding if global financial conditions tighten.
According to Nageswaran, when liquidity dries up or investor sentiment changes, markets do not adjust in a smooth manner. Corrections often happen suddenly, causing stress across asset classes and countries.
The warning comes at a time when major central banks are reviewing monetary policy amid inflation pressures and slowing global growth. The CEA said the global financial system remains sensitive to interest rate changes and capital flow reversals.
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