The Bank of England is missing the bigger picture of the stock market

Nigel Green’s Deavere Group He is speaking after Bank of England deputy governor Sarah Breeden warned in a BBC interview that global equities looked overpriced and likely to fall because prices do not fully reflect the risks facing the global economy.

He says: “Sarah Breeden is right to say that valuations are overpriced. She is right to say that investors should not be complacent. But the conclusion that markets are set for widespread decline 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. There’s no clear historical benchmark for what markets should pay for companies that have led the generational productivity, infrastructure and earnings cycle.”

The warning comes as global equity markets continue to show resilience.

In the UK, the FTSE 100 remains near record highs, trading around the 8,000 level in recent sessions, supported by strong performance in energy, financials and multinational earnings performance.

Despite global uncertainty, the index remains strong, reflecting the strength of corporate balance sheets and overseas revenue streams.

In the US, markets have experienced some near-term volatility after a strong rally, with the S&P 500 and Nasdaq falling slightly in recent sessions.

Yet the broader picture remains strong. More than 80% of companies reporting in the current earnings season have outperformed expectations, underscoring corporate resilience even in a high-rate environment.

Nigel Green says: “Markets never move in a straight line. Valuations in some areas will always go down, in others they will rise simultaneously.

“There will be periods of volatility, and some of them will feel uncomfortable. But investors should be extremely careful in interpreting the senior central bank’s warning as a signal to retreat from the market.

“In our view, the bigger danger for long-term investors is fear of exiting positions while structural growth remains intact.”

AI and technology remain the key forces behind current market dynamics. Companies like semiconductor, cloud computing, data centers, automation, and enterprise software are seeing sustained demand due to the adoption of artificial intelligence.

Capital expenditure is accelerating across the region, with major global companies devoting significant resources to expanding capacity and capability.

Corporate earnings continue to reinforce this trend. Companies with credible AI exposure, strong margins and a clear growth trajectory are outperforming, attracting capital and achieving index-level gains.

This concentration has contributed to lofty valuations, but it also shows where earnings growth is going.

“High valuations demand discipline, but high valuations do not automatically mean illogical valuations. If earnings growth, pricing power and capital infusion are accelerating, the premium may be justified,” believes the Deavere CEO.

“The question investors should be asking is not just whether markets look expensive compared to the past.

“The question is whether the past provides the right benchmark for AI and tech-driven earnings growth.”

He also agrees with the Bank of England that the risks are real.

“Private debt markets are expanding, government debt remains high, and geopolitical tensions, including trade pressures under US President Trump, have the potential to create instability and disrupt expectations.

However, Nigel Green says these risks reinforce the importance of disciplined investing rather than broad market caution.

“Of course, investors need to be prudent. They need diversification, careful asset allocation and investing in sectors and companies that benefit from structural growth trends. They also need to avoid complacency.

“Good advice is essential in this environment as the gap between winners and losers is widening.”

He concluded: “The unusual warning from a senior Bank of England official has value, but it could become a risk in itself if it encourages investors to move away from the market.

“We believe investors should remain invested, remain selective and remain focused on the forces reshaping the global economy.

“There will be volatility, valuations will adjust, but we expect AI and technology to continue to provide a powerful underpinning for markets this year.”