Key insights
- ECB's Schnabel highlights a disconnect between high stock valuations and global economic risks, particularly regarding energy supply chain vulnerabilities and optimistic AI productivity assumptions. This suggests a potential market correction if these assumptions prove overly optimistic, posing a mild bearish signal for US equities due to global market interconnectedness.
LONDON, May 7 (Reuters) - European Central Bank board member Isabel Schnabel said on Thursday that there appeared to be a disconnect between record stock market valuations and the risks facing the global economy.
"There really seems to be a kind of disconnect," she said at an event at the London School of Economics. "One could question whether ... markets are possibly a bit complacent here."Schnabel said markets appeared to assume that damage to energy supply chains from the Iran war would be rapidly reversed - something she viewed as unlikely - and had very optimistic expectations for productivity gains from artificial intelligence.