Bank of England Warns Global Stocks May Be Overvalued

The Bank of England expects global stock markets to fall as share prices do not fully reflect the risks facing the global economy, its deputy governor told BBC News.

Investors may be underestimating several risks in relation to global stocks.

Sarah Breeden said, “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.”

It is unusual for a senior figure at the Bank to be so forthright about market movements.

Breeden, who is also the Bank of England’s head of financial stability, declined to say when markets might fall or by how much. However, she pointed to several risks that investors may be underestimating.

“The thing that really keeps me awake at night is the likelihood of a number of risks crystallizing at the same time — a major macroeconomic shock, a loss of confidence in private credit, and a readjustment in AI and other high-risk valuations.

What happens in that environment, and are we prepared for it?” she said.

A sharp fall in stock markets can have widespread economic effects. If households own shares, a drop in value can make them feel poorer, potentially leading to reduced spending.