Bank of England Deputy Warns Stock Markets Are Too High, Set to Fall

07:23 BST — Stock markets are too high and set to fall, warns Bank of England deputy governor Sarah Breeden, as she highlights multiple risks facing the global economy.

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Stock markets are too high and are going to drop back at some point due to the many risks facing the global economy, one of Britain’s top central bankers has warned.

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Bank of England deputy governor Sarah Breeden issued the prediction to the BBC, at a time when the US stock market has risen to record levels despite the Middle East conflict.

She points out: “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 chimes with the latest assessment from the Bank’s financial policy committee, which pointed to the risks from high AI valuations, AI disruption, and the private credit market.

As she explains, the big fear is that several risks crystallise at the same time – such as an economic shock that leads to a rapid readjustment of AI valuations and hurts confidence in private credit.

Breeden is clear that she’s not predicting a correction imminently… but is focused on making the UK financial system strong enough to cope. “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.”