Broker: CGS International
Date of Report: October 13, 2025
Excerpt from CGS International report.

• Leverage is the main risk driver: The recent US market correction was triggered by an unwind of extreme leverage and crowded trades, particularly in tech and yield products, with the spark being new tariff announcements. Excess liquidity, levered ETF positions, and poor risk compensation have left markets vulnerable to sharp corrections.
• Speculative excess and bubble risks: The US tech sector is showing signs of speculative mania similar to the 2000 bubble, with valuations now at 10x sales. Leverage has also built up in business development companies and private credit, with recent sector stresses and fraud cases (like First Brands) highlighting late-cycle risks.
• Fragile macro and narrow risk premia: Macroeconomic conditions remain fragile, with high public sector leverage and narrow risk premiums in both equities and credit. This increases the risk of a non-linear correction, as credit spreads tend to widen when profits and cash flows weaken.
• Investors should focus on leverage and risk compensation: Given the strong rally in risk assets, elevated valuations, and challenging policy outlook, the odds of a meaningful correction have increased. Key questions for investors: where is leverage concentrated and are they being compensated for the risks taken?

Above is an excerpt from a report by CGS International. Clients of CGS International can be the first to access the full report from the CGS International website : https://www.cgs-cimb.com