THE BANK of England has predicted that global stock market are about to fall. With unusual candour, it has warned that share prices are too high and do not reflect the risks that the global economy is facing.
The view was given by Sarah Breeden, Deputy Governor of the Bank of England, where she is also head of financial stability. She referred to asset prices being at an all time high, which could not be sustained given the many current risks to the global economy.
Breedon did not comment on when a stock market “adjustment” may occur, or how large the fall may be. She pointed out that if a number of the current risks come into play at the same time, the world could face a serious challenge which it is not prepared for.
The comment comes as US stock markets continue with a series of all-time highs, which US President Donald Trump has hailed as evidence that his controversial policies are working. However, the costs of Trump’s war on Iran will have to be paid by someone. When the scale of the bill facing the US taxpayer come to light, stock markets may crash as investors do their sums.
Some technology firms deny there will be a crash and are encouraging investors to put more and more money into AI companies – driving the stock market rises. However, AI only increases company profits by cutting jobs. Increases in unemployment could lead to political instability in the USA. If this happens, AI companies could be seen as over-valued – leading to a crash in share prices. Some commentators are therefore comparing the AI sector with the “dot.com” bubble just before the millennium, when overvalued new technology companies crashed, starting a wave which spread to other industries.
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