Stock markets across the globe have been performing pretty well.
Here in the United States, April was great in terms of the S&P 500 and the Dow Jones hitting new all-time highs.
But the 331-year-old Bank of England is slightly skeptical of this market performance.
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Markets at record highs. But for how long?
The S&P 500 notched a record closing high of 7,137.90 on April 17, capping its third straight week of gains. By April 22, the S&P 500 and the Nasdaq had both hit fresh records yet again.
Several forces like a strong first quarter earnings season, renewed AI and tech momentum, Federal Reserve rate cut expectations, and retail investors piling back in after sitting out the early rally, combined to drive the surge. But the main driver was the Iran war de-escalation.
On paper, it all looks like cause for celebration. The Bank of England, however, is not celebrating.
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A correction on the horizon
“There’s a lot of risk out there and yet asset prices are at all-time highs,” Breeden said. “We expect there will be an adjustment at some point.”
Breeden declined to specify when a correction might arrive or how deep it could be, but she pointed out the risks she sees lurking beneath the surface.
“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.
Why it matters for crypto
A stock market correction of the kind the Bank of England is warning about would likely hit crypto hard and fast.
However, Bitcoin has also recovered in the past month with a 10.51% gain, while Ethereum gained by 7.18%.
At press time, the S&P 500 was up 0.35%, and the Nasdaq Composite was up 0.86%. But Dow Jones Industrial Average was somewhat in the red by 0.28%.
Meanwhile, Bitcoin was trading at $77,808.57, and Ethereum was trading at $2,305.77
