Stock market crash fears soar as Bank of England boss issues dire warning
Soaring energy prices are piling pressure on global economy (Image: Getty)
Years of a stock market crash are mounting after a senior Bank of England official warned that global share prices may be dangerously out of step with economic reality. The Bank’s deputy governor, Sarah Breeden, said markets appear to be ignoring a growing list of risks and signalled that a correction is likely at some stage, with war raging in Iran and Ukraine and fuel prices volatile.
Ms 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.” Such blunt language is rare from a figure at the central bank, especially one responsible for monitoring financial stability.
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Bank of England Deputy Governor Sarah Breeden (Image: Getty)
Speaking to the BBC, Ms Breeden stopped short of predicting when markets might fall or how severe any downturn could be, but in a prediction which will doubtless concern Chancellor Rachel Reeves, she made clear that investors may be underestimating multiple threats building at once.
Ms Breeden said: “The thing that really keeps me awake at night is the likelihood of a number of risks crystallising at the same time – a major macroeconomic shock, confidence in private credit goes, AI and other risky valuations readjust – what happens in that environment and are we prepared for it?”
Her warning comes as global stock markets, led by the United States, continue to hit record highs despite persistent concerns about the strength of the world economy. Analysts have also pointed to heavy spending on artificial intelligence as a potential source of instability.
Some high-profile figures have already raised alarm. Microsoft co-founder Bill Gates has described the rush into AI investment as “a frenzy”, comparing it to the dotcom bubble of the late 1990s, when inflated valuations collapsed and wiped out billions.
Chancellor Rachel Reeves (Image: Getty)
At the same time, strains are emerging in so-called “shadow banking” — private lending markets that operate outside traditional banking rules. Several funds in this sector have reported losses and limited investor withdrawals, fuelling concerns about hidden vulnerabilities.
Ms Breeden warned that the rapid expansion of private credit markets has yet to be tested under real stress. Ms Breeden said: “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 with the degree of complexity and interconnections it has with the rest of the financial system so far.”
Ms Breeden said: “It’s a private credit crunch, rather than a banking-driven credit crunch, that we’re worried about.”
While UK markets have not been driven by the same concentration of large AI firms seen in the US, the FTSE 100 remains close to record levels, reflecting the broader global surge in asset prices.
Ms Breeden emphasised that the Bank of England’s role is not to forecast market timing but to ensure resilience if conditions deteriorate.
Ms Breeden said: “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?”
Ms Breeden said: “I’m not saying it will happen today, tomorrow, in 12 months’ time. It’s ensuring that if it happens the system is resilient.”