Bank of England believes global markets are vulnerable to the risk of a sharp correction


10/03/2024

Bank of England analysts believe that global asset prices are still too high and may experience major drops due to increasing worries about geopolitical risks.



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Valuations for various asset categories, especially stocks, have rapidly increased back to high levels after dropping in August. The financial policy committee of the British central bank warned in its quarterly report that markets are at risk of a sudden correction.

The report stated that significant global vulnerabilities persist, along with uncertainties surrounding the geopolitical environment and the global economic future.

The level of worry regarding geopolitical risks has hit its peak since 2008, as per the findings of a biannual survey conducted among top financial firms in the UK.

The focus of market participants is on the conflicts in the Middle East and Ukraine, along with the upcoming presidential election in the United States.

Bank of England experts observe that hedge funds' "short" positions in U.S. government bonds have grown to $1 trillion, rising by $125 billion from June. If assets need to quickly liquidate these investments, it may cause significant pressure on the financial system.

source: marketwatch.com