The Bank of England’s latest stock market warning: Why you should stay calm
In April 2026, the Bank of England’s (BoE) deputy governor warned that global markets could be set to fall – as BBC News reports.
In particular, the BoE suggested that a major macroeconomic shock, a decline in private credit confidence, and an adjustment of AI valuations could trigger a sharp fall in global markets.
Such warnings can be unsettling, particularly following a period of volatility. However, it’s important to remember that markets have historically trended upward over the long term. So, even if values do fall, it might not impact your investment returns as much as you think.
Read on to discover why the BoE is bracing for a downswing and learn three tips for staying calm during periods of volatility.
Unpredictable global events could cause stock market volatility
A “major macroeconomic shock” can cover a wide range of unexpected events, such as wars, pandemics, financial crises, or unexpected policy changes. Most recently, the outbreak of war in the Middle East caused markets to fall, before they rebounded weeks later.
These shocks often have national or global economic impacts and can drive share prices down by:
- Disrupting supply chains
- Altering demand patterns
- Impacting interest, inflation, and unemployment rates.
By nature, macroeconomic shocks are unpredictable. It’s nearly impossible to predict if or when an event could occur and what the impacts might be.
Whatever the future might hold, it’s important to remain calm. Volatility is part and parcel of the stock market, so temporary drops are to be expected rather than feared.
Indeed, the markets have recovered from even their most significant economic shocks – from the 2008 financial crisis to the Covid-19 pandemic. Not only have values rebounded, but they have generally continued growing to reach new record highs.
A decline in private credit confidence could impact share values
When investors lend money to companies, they can typically expect to receive the full amount back with interest when the loan matures. This is known as “private credit”.
Private credit can often be an attractive investment due to the fixed interest rate. However, if lenders begin worrying about whether the loan will be repaid, private credit can become less attractive. If this happens:
- Fewer companies may be able to borrow
- Loans may have higher interest rates
- Investors may become more selective about which companies they lend to.
These trends can have a knock-on effect on the stock market. If companies are unable to borrow the money they need to stay afloat, more listed entities could fail – causing market values to fall.
Confidence can decline for several reasons, including:
- More companies struggling with repayments
- The economy slowing down or entering a recession
- Supply of private loans outpacing demand
- Company valuations falling.
Private credit has grown quickly, while loan restructurings and “amend-and-extend” deals have increased. As such, some commentators have expressed concerns about an upcoming private credit crunch.
That said, many loans are still performing well. So, while it may be worth approaching private credit with increased scrutiny and caution, there may be no immediate cause for concern.
High AI valuations could experience a market correction
AI has attracted exceptionally high investment over recent years, with values rising as more investors seek to benefit from the technology’s growth.
However, many commentators have suggested that this enthusiasm has pushed values too high. While many AI-linked companies have seen their share prices soar, these valuations are often based on optimistic prospects rather than actual performance.
As such, some believe this has created an “AI bubble”, not dissimilar to the “dot-com bubble”, which saw the value of internet-based companies drop significantly at the end of the 20th century.
If those who predict AI is a bubble are correct, overvalued stocks would eventually be adjusted to reflect companies’ profits and more realistic performance projections. If this happens, larger companies could lose a significant amount of their value, while smaller AI start-ups could fail.
If values do fall, the impacts may not be isolated to AI-focused companies alone. According to CNBC, five tech giants now make up nearly 30% of the S&P 500 (an index of the largest companies listed in the US). If their share prices drop, the wider market could follow suit.
In particular, values may come down if:
- Adoption of AI is slower than projected
- Profits don’t meet expectations
- Investors become less willing to pay high prices for shares, for example, if the economy slows down or interest rates rise.
That said, it remains to be seen whether the AI boom really has caused a bubble. While an adjustment to AI values is possible, it’s not inevitable.
3 tips for staying calm amid stock market volatility
When the media reports a drop in share values, whether it’s already happening or has been forecast, you would be forgiven for feeling panicked.
However, the real impact on your investments may not be as severe as the headlines make it seem. Amid ongoing and forecast volatility, it’s important to remain calm and avoid making any knee-jerk decisions based on fear.
Here are three tips for staying calm when share values drop:
- Remember that values have historically recovered in the long run. The markets have rebounded and continued growing after even their most significant downturns. So, selling when values fall could see you lock in a lower return – or even a loss – while staying invested for the long term could mean your portfolio has the opportunity to recover and deliver a positive return.
- Shut out the media noise. While it can be good to stay informed, consuming too much media commentary on market performance can fuel your anxiety. By limiting your exposure to carefully selected, balanced market commentaries, you can help maintain a realistic view of the markets and avoid the panic of media headlines.
- Speak to your financial planner. If you’re concerned about how market trends might impact your investments and future goals, it’s important to seek financial advice before making any decisions. We can talk you through what’s happening in the markets, what it means for your portfolio, and what next steps – if any – would be appropriate.
Whether you’re already a client or looking for a trusted source for investment support, we can help you assess the impact of current and forecast market trends to define a strategy tailored to your needs, goals, and risk appetite.
To find out more about how we can help you, get in touch.
- Marnel Stafford: email Marnel.Stafford@fosterdenovo.com or call 07305 970959
- Ryan Edwards: email Ryan.Edwards@fosterdenovo.com or call 07591 758136
Alternatively, you can call our office on 0207 469 2800.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
