The ECB said in a Monday blog that frothy US tech valuations may be vulnerable to a market correction and that limited fiscal and monetary policy space would constrain the ability to cushion any economic shock. Prices could fall even if technologies succeed and corporate profits rise because profit expectations may be overly optimistic; when investor sentiment reverses, losses can outpace what would occur under rational pricing. A US tech downturn would pose a financial‑stability risk for Europe

The ECB said in a Monday blog that frothy US tech valuations may be vulnerable to a market correction and that limited fiscal and monetary policy space would constrain the ability to cushion any economic shock. Prices could fall even if technologies succeed and corporate profits rise because profit expectations may be overly optimistic; when investor sentiment reverses, losses can outpace what would occur under rational pricing. A US tech downturn would pose a financial‑stability risk for Europe: European household exposure to the seven largest US tech firms is roughly €440bn, with pension funds and insurers holding similar-sized exposures. Given high correlation between European and US markets, European equities would likely be affected.