Bank of England deputy warns stocks look too high and could fall. Covid era supply shocks drove similar price spikes when delivery delays and input costs surged together

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Multiple risk stack flagged, macro shock, private credit stress, AI valuation reset risk combined.

Global stock markets are too high and set to fall, says Bank of England deputy

“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?” she said.

AI-related stocks now reflect a record 45% of the S&P 500's market cap
byu/RobertBartus inEconomyCharts

Inflation through the roof: this is the unquestionable message of the US, Eurozone and UK April PMIs

In the Eurozone, Output Prices have jumped to 57.0, the highest since Mar-23, consistent with HICP inflation surging to ~5%.
In the UK, Output Prices at 62.2 and Input Prices at 76.0 mark the highest since Nov-22, consistent with CPI inflation skyrocketing towards ~7%.
In the US, Output Prices are rising at the sharpest pace since Jul-22, consistent with CPI climbing to almost 5%.

Moreover, and most importantly, price pressures are stemming not only from higher energy inputs, but also from lengthening of delivery times driven by the crisis in the Middle East, a feature similar to the Covid crisis.

Pressures for tighter monetary policy, barring a sudden de-escalation, are mounting for all major central banks, starting from pure inflation targeters, like the ECB and the BoE. The Fed faces a more intricate calculus given its dual mandate, yet US growth remains too firm to justify a hold premised on the hope of transitory inflation, let alone rate cuts against rising inflation. Indeed, the market’s continued pricing of Fed easing makes US rates the most aggressively mispriced across the G3 central banks.