Investors are being too cavalier about the risks in the market, suggest National Bank Financial in a new report.

“Investors are demanding less compensation for assuming many risks inherent in financial markets. It’s as though they believe nothing can go wrong,” NBF says.

“However the enormous global imbalances currently in the system will eventually correct themselves. The larger these imbalances become, the harder they will be to resolve and the larger the risk they will pose to the economy,” it warns.

NBF notes that risk tolerance is increasing. “Emerging markets now borrow at rates inconceivable just a few years ago. Premiums built into numerous U.S. rates have dropped significantly and market volatility is notably absent,” it says.

“The absence of risk premiums shows that markets believe that global imbalances will correct themselves painlessly,” it concludes. “We believe that scenario is overly optimistic. Those who believe in it, do so at their risk and peril.”