Policy

If AI Disappoints? The Transmission of US Big-Tech Earnings News

[Bank Underground Post | August 2026] Bloomberg Coverage

(with Roger Vicquery and Emilio Zaratiegui)

There is growing concern among policymakers, international organisations, and even big-tech Chief Executive Officers (exhibits I, II and III) that the current artificial intelligence (AI) boom features valuations increasingly detached from fundamentals. The Bank’s February 2026 Monetary Policy Report noted that an asset price correction is a key risk to the global economy, while the Bank’s July 2026 Financial Stability Report presented a scenario for how an AI correction could unfold. In this post, we study how negative big-tech earnings news transmits to global markets, which informed discussions around this scenario. We find that the effects ripple far beyond tech: equity indices decline, credit spreads widen and the US dollar depreciates. This last result, together with the limited response of Treasury yields, suggests muted flight-to-safety dynamics, unlike other financial stress episodes.

Equity-Market and Exchange-rate Response to Negative US Big-Tech Earnings News

Rethinking global imbalances: drivers, risks and policy priorities

[Bank of England Staff Discussion Paper | March 2026] 

(with Ambrogio Cesa-Bianchi, Dan Christen, Peter Denton, Will Dison, Aydan Dogan, Ida Hjortsoe, Mark Joy, Jeremy Martin, Roger Vicquery, Simon Whitaker)

This paper takes a fresh analytical look at the drivers and consequences of global imbalances. It finds the following: (i) persistent excess imbalances are driven primarily by domestic macroeconomic factors, consistent with the literature; (ii) however, industrial policy, which there has been a resurgence of globally, can have second-order impacts on the current account over the short to medium term under certain conditions; (iii) it may also have impacts over the longer term, but our collective understanding of these impacts, and their spillovers, is partial; (iv) global external balance sheets show vulnerabilities that could interact with other global financial stability risks in disorderly unwind scenarios.