The Bank of England, the head of the International Monetary Fund, and some leading establishment publications like The Economist are now warning simultaneously about the risk of a “sharp market correction” in stocks and financial instruments related to AI companies, indicating that something large could be afoot. Normally, such institutions might be tight-lipped and state that there is little to worry about, but no longer.
On Oct. 8, the Bank of England’s financial policy committee (FPC) warned: “The risk of a sharp market correction has increased. … On a number of measures, equity market valuations appear stretched, particularly for technology companies focused on artificial intelligence (AI). This … leaves equity markets particularly exposed should expectations around the impact of AI become less optimistic.”
It continued, that investors had not fully accounted for these potential risks, warning that “a sudden correction could occur,” resulting in finance drying up for households and businesses. FPC added: “As an open economy with a global financial center [the City of London], the risk of spillovers to the U.K. financial system from such global shocks is material.”
Likewise, on Oct. 8, speaking at the Milken Institute, International Monetary Fund Managing Director Kristalina Georgieva cautioned that “Before anyone heaves a sigh of relief please hear this: global resilience has not yet been fully tested. And there are worrying signs the test may come” [emphasis in original]. She told the audience to “buckle up,” that “uncertainty is the new normal, and it’s here to stay.”
