The swirl of events has brought a confluence of facts and perceptions centre-stage. Global growth is wading through uncertainty. Debt and deficit in G7 economies is at a peak. Trump has upended the global trade order. Yet, stock indices are hovering at their peak in what bulls call ‘the everything rally’, and gold and silver prices are spiralling to record highs.
Gordon Gekko immortalised the line “Greed is good, greed works, greed is right” in Wall Street. However, greed entails consequences and fear is primordial. John Maynard Keynes said, “The market can remain irrational longer than you can remain solvent.” The trillion-dollar rise in valuations has triggered the ‘what if’ question. It does seem global savers are poised on the brink of hope and fear.
While the perfect crystal ball to divine the future is yet to be crafted, the factors driving emotions merit attention. Here are a few observations—on the signals and the noise—worth pondering over.
Like the catalyst for both the exuberance and the fear is the velocity of rise in valuation. The price of gold has spiralled 62 percent since January 1 to $4,250; Goldman Sachs’ September 30 estimate of gold at $4,000 in 2026 was breached on October 8. Silver shot up over 78 percent to $51.90 an ounce in less than 10 months.
In the stock markets, the US benchmark S&P500, which slid to 4,982 following Trump’s ‘Liberation Day’, has since notched new highs to hit 6,664, and the Nasdaq Composite shot up from a low of 15,267 to 22,679. Stocks in Europe and Nikkei225 piggy-backed the global rally despite faltering growth in the UK, France and Germany, and political turmoil in Japan. In India, GDP growth and earnings boosted the Nifty50 to a 52-week high amid heavy selling by foreign investors.
It is true that the rise in gold prices represents angst about economic uncertainty. It is equally true that gold has emerged as an asset class. Gold exchange traded funds have added 634 tonnes just this year. Pension funds and sovereign wealth funds are also big tag buyers. Add the geopolitical feature—central banks have accumulated 1,000 tonnes each year for three years to add to their reserves as an alternative following the freezing of Russia’s reserves. The scent of fear has spiralled with demand outstripping supply.
Like, it is noteworthy that the rise in US indices is fuelled by foreign ownership of US stocks, which has touched $18 trillion, or roughly a third of the market—the highest in the post-war era even though the dollar has slid over 10 percent. US stocks have emerged as a proxy to the dollar and US Treasuries following sanctions and the geopolitical questions enveloping the role of the dollar as a safe haven. As global savers upped stakes in stocks, systemic risk has gone up. Gita Gopinath, formerly deputy managing director at IMF, believes a shock emanating from the US could impact global demand and growth.
The rise of the ‘Magnificent 7’ stocks since Liberation Day is striking—the CNBC Mag 7 Index, which slid to 250, is now at 405. Between them, the Mag 7 stocks—Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta and Tesla—are worth over $20 trillion, or more than the GDP of China. Nvidia, which dominates the chips market and hence the AI story, is up 32 percent; Microsoft, a major investor in OpenAI, is up 22 percent. It is being argued that the rise in AI stocks is debatable. The question ricocheting off Wall Street is where are the revenues? Critics flag the prevalence of ‘vibe revenues’ in the ecosystem and see parallels with the 1999 dotcom bubble. Interestingly, the biggest gainer in the S&P500 is Robinhood Markets—up over 200 percent to $129 this calendar year.
Like the scepticism about the quality and speed of the rise of stock indices is focused on AI stocks—particularly after the trillion-dollar declarations of consanguineous nature by chip-makers, buyers and infra developers. Indeed, OpenAI chief Sam Altman believes, “AI could be in a bubble.” Bridgewater founder Ray Dalio says the AI bubble echoes dotcom excesses. Torsten Slok of Apollo Global avers that the AI bubble is bigger than the 1990s’ dotcom bubble. Sceptics point out that several metrics such as the Buffet Indicator on US market cap as a ratio of GDP and concentration of market leadership signal trouble ahead.
What is troubling investors is that the indices seem to shrug off every live issue that must impact valuations. Mind you, the promise of ‘liberation’ is yet to be realised and the issue of trade deficits is far from settled. Tariff trackers illustrate the state of negotiations rather eloquently. For instance, the largest deficit is with China and the trade talks there are following a pretend-and-extend or rinse-and-repeat pattern. Last week, Trump threatened to impose additional 100 percent tariffs on China, only to end this week arguing it is not sustainable.
Like the award for the perfect diagnostic analogy for detecting rot must go to Jamie Dimon. The JP Morgan CEO said, “When you see one cockroach, there are probably many more.” Dimon deployed the analogy to highlight risks and frauds in regional banks and private credit markets that have been haunted by ‘mark-to-myth’ valuation questions.
Finally, the contest between hope and fear is best explained in the ‘yaksha prashna’ in the Mahabharata. The reality of mortality is visible on a daily basis, and yet, people seek to live longer, even immortality.
Read all columns by Shankkar Aiyar
Shankkar Aiyar
Author of The Gated Republic, Aadhaar: A Biometric History of India’s 12 Digit
Revolution, and Accidental India
(shankkar.aiyar@gmail.com)
