Bank of England warns global stock markets look overvalued, risk adjustment ahead

A senior Bank of England warning carried unusual weight because it came from Sarah Breeden, the deputy governor for financial stability, a policymaker who usually speaks in terms of system risk rather than market direction. Breeden said global stock markets looked too high and were likely to fall because share prices did not fully reflect the risks building across the world economy.

Her message was stark. “There’s a lot of risk out there and yet asset prices are at all-time highs,” Breeden said, adding that “there will be an adjustment at some point.” She declined to say when that adjustment might come or how severe it could be, but the intervention itself signaled concern that investors have become too comfortable with stretched valuations.

Breeden pointed to private credit and AI-linked shares as two areas where complacency may be building. Private credit has expanded from virtually nothing to about $2.5 trillion over the past 15 to 20 years, and Breeden warned that the market has not yet been tested at that scale or with its current connections to the wider financial system. “Private credit has gone from nothing to two-and-a-half trillion dollars in the last 15 to 20 years. It hasn’t been tested at this scale,” she said, warning that a broad-based crunch in private markets could tighten financing conditions for the UK real economy.

Her remarks echoed comments earlier in April, when she said AI-related valuations had adjusted somewhat but remained elevated. The concern is not just about whether a handful of high-flying stocks can keep climbing. It is about whether a cluster of richly priced assets, from technology shares to private loans, has already absorbed too much optimism about growth, earnings and the ability of capital markets to keep funding risk.

The timing matters. Breeden’s comments came after a turbulent stretch for markets, with conflict in the Middle East, trade disruptions and recent volatility in both equity and bond markets adding to uncertainty. As the Bank of England watches for signs of strain, her warning suggests a broader policy worry: that investors may be treating an increasingly fragile environment as if it were still smooth sailing. Breeden joined the Bank in 1991, and her role on the Financial Stability Board and the G20 makes her one of the institution’s most visible voices on global financial risk.