Bank of England Deputy Warns Stock Markets Are Overvalued and Due for a Fall

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Stock Markets at Risk of Correction, Says Bank of England Deputy

Stock markets are overvalued and poised for a downturn given the multitude of risks confronting the global economy, a senior Bank of England official has cautioned. Sarah Breeden, the deputy governor of the Bank of England, issued this warning to the BBC at a time when US stock indices have soared to unprecedented levels, despite ongoing geopolitical tensions in the Middle East.

Breeden highlighted the disconnect between elevated asset prices and the prevailing risks, stating, “There’s a lot of risk out there and yet asset prices are at all-time highs. We expect there will be an adjustment at some point.” This assessment aligns with the latest findings from the Bank’s financial policy committee, which has flagged concerns over inflated valuations in the artificial intelligence sector, potential disruption from AI advancements, and the expanding private credit market.

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The primary concern, according to Breeden, is the possibility of multiple risks materializing simultaneously—for instance, an economic shock that triggers a rapid repricing of AI assets and undermines confidence in private credit. While she refrained from predicting an imminent correction, Breeden emphasized the importance of ensuring the UK financial system is robust enough to withstand such a scenario.

“What we are watching for is how might those prices fall? Will there be a sharp adjustment downwards? And if there is such an adjustment, how will that affect the economy? I’m not saying it will happen today, tomorrow, in 12 months’ time. It’s ensuring that if it happens the system is resilient,” she explained.