From Sovereign Debt to AI Stocks: BoE Sees Risk Across US Asset Classes

The Bank of England sees significant risk across major US asset classes, from sovereign debt to high-flying AI stocks, creating a complex and dangerous environment for global financial stability. The Financial Policy Committee (FPC) warned that the probability of a “sharp market correction” has risen.
On the sovereign debt front, the risk stems from political attacks on the Federal Reserve. The FPC cautioned that if Donald Trump’s commentary erodes the Fed’s credibility, it could trigger a “sharp repricing” of US government bonds, causing global turmoil.
In the equity market, the risk is concentrated in the AI sector. The FPC described the valuations of firms like OpenAI ($500 billion) as “stretched” and vulnerable to a collapse if the hype fades. This is supported by an MIT study showing 95% of companies are not yet profiting from the technology.
The Bank is concerned that these two risks could interact. A crisis in the US debt market would make it harder for the system to absorb a simultaneous crash in the tech sector, and vice versa.
The FPC stressed that this is a major threat to the United Kingdom. As a key global financial player, Britain is exposed to shocks in all major asset classes, and the “spillovers” from a US crisis would be “material,” potentially freezing credit markets at home.