Stock markets will fall, Bank of England deputy governor says

Bank of England Deputy Governor Sarah Breeden warns that record-high global stock markets are set for a fall, citing risks from private credit and overvalued AI stocks. | Contesto: cronaca

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• Stock markets will fall, Bank of England deputy governor says

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Global stock markets, currently at record highs, are poised for a sharp decline because they fail to reflect the true risks in the world economy, a senior Bank of England official warned on Wednesday. Sarah Breeden, the Bank’s deputy governor for financial stability, said she expects a market ‘adjustment’ as investors have not fully priced in macroeconomic dangers, including the rapid growth of private credit and the inflated valuations of artificial intelligence stocks. In a stark assessment delivered during a speech in London, Breeden highlighted that equity markets appear disconnected from underlying economic vulnerabilities. She pointed to the surge in private credit—lending outside the traditional banking system—as a particular concern, noting that this opaque sector could amplify losses during a downturn. Additionally, she flagged that highly valued AI stocks, which have driven much of the recent market rally, are especially vulnerable to a correction if growth expectations fail to materialize. The warning comes as major indices, including the S&P 500 and the FTSE 100, have repeatedly hit new peaks, fueled by optimism over technological innovation and expectations of central bank interest rate cuts. Breeden, however, argued that this optimism overlooks persistent inflation pressures, geopolitical tensions, and the fragility of certain financial sectors. ‘The risks are elevated, and markets are not pricing them in,’ she said, according to prepared remarks. Breeden’s comments add to a growing chorus of central bankers and regulators who have expressed unease about frothy asset prices. Her focus on private credit is particularly notable, as the sector has ballooned to over $2 trillion globally, with limited oversight. She cautioned that a sudden repricing could trigger a cascade of defaults, especially among highly leveraged companies that have turned to private lenders after traditional banks tightened standards. The Bank of England deputy governor also addressed the broader economic backdrop, noting that while inflation has eased from its peaks, it remains sticky in key areas such as services. This complicates the outlook for interest rates, which the Bank...

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Categoria: cronaca