A trader works on the floor at the New York Stock Exchange (NYSE) in New York City, United States, on April 23, 2026.
Jinnah Moon reuters
International equity markets are overvalued and will fall, according to a senior Bank of England leader.
Sarah Breeden, deputy governor for financial stability at the UK central bank, told the BBC in an interview published on Friday that macroeconomic risks were not fully assessed in equity markets.
“There is a lot of risk out there and yet asset prices are at an all-time high,” he said. “We hope there will be an adjustment at some point.”
It is unusual for Bank of England officials to be so clear about capital markets’ expectations.
“The thing that really keeps me up at night is the possibility of multiple risks emerging at the same time – a major macroeconomic shock, confidence in private credit, AI and other risky valuations readjusted – what happens in that environment and are we prepared for it?” Breeden said during the interview.
Global equity markets have been volatile since the US and Israel launched joint attacks on Iran in late February, but many developed markets are still trading near record highs. New York on Wednesday S&P 500 And nasdaq composite The stock closed at new all-time highs, with global stocks recovering from Iran war losses.
S&P 500
The MSCI World ex-US index, a measure of large- and mid-cap stocks listed in more than 20 developed markets, has also made gains since the war began, rising more than 5% year-to-date.
Fear of ‘private credit crisis’
Breeden also pointed out Friday’s interview discussed problems with private debt, where rising defaults have drawn criticism and concern from market watchers.
“Private debt has gone from zero to two and a half trillion dollars over the last 15 to 20 years. It has never been tested on this scale until now, with its degree of complexity and interconnectedness with the rest of the financial system,” Breeden said.
“It is a private credit crisis, rather than a banking-driven credit crisis, that we are concerned about.”
The Iran war has clouded global markets for the past two months, but despite record valuations, many market participants remain optimistic about where stocks are headed.
In his latest monthly letter to clients, Mark Haefele, chief investment officer at UBS Global Wealth Management, said increased energy costs posed a risk but had a positive impact on global stocks.
“Without prolonged setbacks, we believe the economy and corporate earnings backdrop remain solid, providing support to equities,” he said.
“If companies meet earnings expectations and geopolitical tensions ease even slightly, there is a clear path for equities to rally,” Daniel Casali, chief investment strategist at wealth management firm Evelyn Partners, said in a note last week.
“For investors, earnings rather than energy may be the key market driver for the remainder of the year.”
Nigel Green, CEO of Deavere Group, said that, while Breeden was right to say that valuations are high and investors should not be complacent, the conclusion that markets are set for widespread declines “misses the central point, which is that AI and technology are changing valuation frameworks in real time.”
“We’ve never had AI on this scale before,” he said in a note after Breeden’s interview aired. “There is no clear historical benchmark for what markets should pay for companies that are leading the productivity, infrastructure and earnings cycle once in a generation.”
Others, including Goldman Sachs boss David Solomon and Trump himself, have expressed surprise at the market’s resilience amid the Iran war.
— cnbc Sean Conlon and Lisa Kailai Han contributed to this report.
