Wall Street leverage rise and Asian investment shift raise market risk

U.S. equities have approached record highs, prompting asset managers to look beyond Wall Street for growth. Analysts at DWS note that Taiwanese and Korean firms supplying semiconductors and data‑center components are attracting attention, with earnings for Taiwanese companies projected to rise 35% this year and 23% next year, and Korean KOSPI firms expected to see 168% profit growth. The relatively moderate valuations of these Asian stocks and the improving fundamentals of emerging‑market bonds are also drawing interest, although a slowdown in U.S. AI‑related investment could negatively affect those markets.

At the same time, leverage in U.S. financial markets is expanding, driven by higher borrowing for margin accounts, leveraged ETFs and shadow‑banking activities. Market participants warn that increased debt amplifies sensitivity to liquidity shocks and could intensify price swings if the economy weakens. Despite recent volatility in the S&P 500 and Nasdaq 100, traditional volatility measures remain modest, but experts caution that a broader macro‑economic shock could trigger rapid deleveraging and sharper market corrections.