BIS Quarterly Review (December 2025): volatility challenges risk-takingThe AI-fuelled stock rally is prompting the question “Isn’t this too high?”
On December 8, 2025 the BIS published its Quarterly Review. It says the risk-on mood that prevailed for much of the review period faced mounting challenges from spells of market volatility, concerns about an economic slowdown and unease around stretched equity valuations. The AI-related boom in equity prices shaped market developments, and valuations of risk assets remained at historically elevated levels.
Key points
- The AI-related equity boom continued and large cap tech stocks outperformed for much of the period, but showed signs of retrenchment towards the end on wariness about valuations; Japanese stocks rallied after political changes raised expectations of an expansionary fiscal stance, and emerging market equities in many cases posted larger gains than advanced economies
- The “Magnificent 7” share of the S&P 500 market capitalisation has grown to nearly 35% from about 20% in November 2022, raising concerns about stretched valuations and the risk of a correction spilling over to the broader market
- Credit markets were mostly unswayed by equity volatility and spreads stayed compressed; leveraged loan spreads edged up after defaults in October, but the tremors were short-lived
- The Federal Reserve cut rates twice and the FOMC announced it planned to halt its balance sheet reduction in December; other major central banks stayed on hold but signalled readiness to provide support
- Gold surged in parallel with other risk assets, and the US dollar halted the downward path it had entered in April, appreciating especially against the Japanese yen and other Asian currencies
What to do in practice
- Review how larger swings in share prices or exchange rates would affect your financial assets and foreign-currency transactions
- Check the details in the chapters of the original (risk assets, sovereign yields, precious metals and the dollar)
The BIS, an international organisation, has summed up what happened in the world’s financial markets. Shares of AI-related companies rose sharply, and the mood in markets was bold. But worries about a slowing economy and fears that shares have become too expensive caused some big ups and downs in share prices.
- ○Applies: The rise in AI-related share prices continued
- ○Applies: Towards the end, worries about high valuations appeared
- ○Applies: The market for companies’ borrowing was little swayed by the swings in shares
- ×Does not apply: The price of gold fell
Points
- Shares of AI-related firms rose a lot and became a much bigger part of the market
- Towards the end, some investors grew cautious that prices might be too high
- The market for companies’ borrowing, such as corporate bonds, was little affected by the ups and downs in shares
What the words mean
- overvalued share price
- a state where the price of a share is too high compared with the company’s earning power
- risk asset
- an asset such as shares whose price can swing widely and may lose money
The risk-on mood that prevailed for much of the review period in global financial markets faced mounting challenges from spells of market volatility. These coincided with broader policy uncertainty amid growing concerns about an economic slowdown and unease around stretched equity valuations.
- Bank for International Settlements (BIS): BIS Quarterly Review, December 2025
Economic news presents published statistics and outlooks. It is not investment solicitation or trading advice. Figures are as of publication and may be revised.
This article summarizes and explains materials published by government agencies and is not advice on any individual case. Rules can change, so for actual procedures and decisions always check the latest original materials and consult professionals such as tax accountants or labor and social security attorneys. English, Simplified Chinese and Traditional Chinese versions are translations prepared from the Japanese articles for convenience. If anything differs, the Japanese text and the original source take precedence.