MNI: BOE FPC Highlights Risks From Tech Equities Overvaluation

The risks of a sharp market correction have risen amid pressure on sovereign debt markets and stretched equity valuations, especially in large U.S. technology companies, according to the Bank of England's October Financial Policy Committee meeting record.

There has been a steep increase in the number of market participants citing the risk of financial market disruption, the Bank of England's H2 Systemic Risk Survey showed. 36% of respondents cited risks associated with a global economic downturn, up 3 percentage points from the 2025 H1 survey, while 46% of respondents noted the risk of a reduction in market liquidity, up 13 percentage points. However, only 7% of respondents cited inflation risk, a 10 percentage point decline from the previous survey. 

Concerns over Federal Reserve independence risk "a sharp repricing of U.S. dollar assets," the FPC noted. "The risk of spillovers to the UK financial system from such global shocks is material," the FPC noted. "Term premia in sovereign bond markets have increased in many advanced economies," the FPC added.

The FPC noted that the top 5 tech firms now account for 30% of the value of the S&P500 index, highlighting the potential impact of a tech stock correction. It noted that some valuations are comparable with those seen in the dot-com bubble, although equity risk premia are below levels in the early 2000s. A sharp correction could fuel vulnerabilities in the system of market-based finance, it said.

There has been a sharp rise in risks associated with a global economic downturn, with 85% of respondents citing geopolitical risk, marginally down from the 2025 H1 survey. 56% of participants expressed concern about a UK economic downturn, 6 percentage points below the previous survey.