BY JOHN ELLIS, FINANCIAL ADVISOR
Global financial markets are flashing warning signs, and Ireland, one of the world’s most open economies, is particularly exposed, according to the Central Bank of Ireland’s most recent Financial Stability Review.
Governor Gabriel Makhlouf highlighted a worrying disconnect. While equity markets, driven largely by US technology and artificial intelligence (AI) stocks, have reached record highs, economic uncertainty remains elevated. Corporate bond spreads are unusually tight, fiscal deficits are rising across advanced economies, and the risk of a sudden market correction is increasing. A sharp fall in US tech valuations could trigger a broad repricing of risk worldwide.
For Ireland, these global risks are amplified by our heavy reliance on US foreign direct investment (FDI), particularly from a small number of highly globalised sectors that drive much of our output, employment and corporation tax revenue. Any slowdown in US tech or AI-related investment could have a disproportionate effect on jobs and public finances.
Domestically, the picture is mixed. The Central Bank notes that Irish households, businesses and banks currently have relatively healthy balance sheets, and that the banking system could absorb a severe shock. Mortgage lending has grown in line with incomes, and there is no sign of the reckless lending that fuelled the 2008 crash. However, house prices continue to rise, mainly due to a chronic shortage of supply rather than excessive credit.
At the same time, the most recent Bank of Ireland Financial Wellbeing Index reveals widespread unease among ordinary people. The survey, conducted in September 2025, shows that only 36% of respondents feel confident about 2026. Long-term financial planning confidence is even lower, at just 45%. Those in the “struggling” and “stretched” groups, roughly half the population, report the lowest confidence, with cost-of-living pressures the central concern. Savings built up during the pandemic have largely been depleted.
Renters and those trying to buy their first home are particularly pessimistic. Many are reluctant to contact their bank when in difficulty, fearing it will damage their credit record. Dawn Bailey, Bank of Ireland’s Head of Financial Wellbeing, urges people to reach out early, noting that engagement with lenders tends to produce better financial and mental health outcomes.
This growing sense of pessimism fits into a broader global pattern. A major new analysis by The Economist highlights how persistent gloom is now acting as a drag on growth across advanced economies. When people expect the future to be worse, they delay major purchases, invest less and become more supportive of “protectionist and redistributive policies”. In Ireland, this mindset risks slowing the very investment in housing and infrastructure that we urgently need.
The combination of stretched global valuations, trade uncertainty, heavy dependence on US tech FDI and domestic cost-of-living strain creates a challenging outlook. While the financial system remains resilient, the gap between market optimism and public pessimism is widening. Restoring confidence will require continued careful management of public spending, sustained housebuilding, clear communication of policy and better support for those in financial difficulty.
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