Soaring stock market valuations on both sides of the Atlantic are stoking fears of a looming correction as valuations hit levels not seen since the dotcom bubble and the eve of the Wall Street crash.

Stocks are trading at levels only previously reached in the run-up to Black Tuesday and the tech collapse of 2000, fuelling concerns among economists that markets are destined for a devastating reversal that would throw world economic growth off track.

“In both cases, sharp market ­declines followed these high readings,” warned Graham Hacche at the National Institute for Economic and Social ­Research (NIESR).

Pointing to the cyclically adjusted price-earnings ratio (the Shiller CAPE ratio), rising to above 30, Mr Hacche said that this indicated “markets may have become increasingly vulnerable to shocks”, which “could have significant negative repercussions on private consumption and investment”.