Market correction risk looks elevated as stocks hit record highs, top Europe central banker warns

Luis de Guindos, vice president of the European Central Bank (ECB), at a rates decision news conference in Frankfurt, Germany, on Thursday, Jan. 30, 2025. Alex Kraus/Bloomberg via There is an "elevated" risk of a market correction, European Central Bank vice president Luis De Guindos told CNBC on Wednesday, as stock indices notch fresh record highs despite a combination of geopolitical turmoil, fiscal challenges and outsized valuations. "There is a risk of a correction because valuations in markets are quite high, quite elevated and ... the main element of concern, from our standpoint, is geopolitical risk," the senior ECB official told CNBC's Annette Weisbach. "On top of that, we have the fiscal situation in Europe, we have the situation of non-banks, mainly private credit and private equity institutions, and the interconnection of these non-banks with the banking system. So it's a combination of elements," he noted. The duration of the war in Iran could prove pivotal to the degree of risk markets face, De Guindos said, amid continued market confidence in a quick resolution. "Markets discount that the conflict will be over shortly and if that's not the situation, that could trigger a modification in the perception of markets. That, in combination with other elements ... might trigger a correction in markets," he said. …