{"id":92065,"date":"2026-05-03T07:55:07","date_gmt":"2026-05-03T06:55:07","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=92065"},"modified":"2026-05-03T07:55:07","modified_gmt":"2026-05-03T06:55:07","slug":"stock-markets-reality-and-detachment","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2026\/05\/03\/stock-markets-reality-and-detachment\/","title":{"rendered":"Stock markets, reality and detachment"},"content":{"rendered":"

I read two articles yesterday on stock markets and their detachment from reality. The first was in the Financial Times, and was by Gillian Tett, who I increasingly see as an establishment shill these days. Her piece of puff, because there appeared to be remarkably little of substance to it, began like this<\/a>:<\/p>\n

Welcome to the paradox of 2026. War in the Gulf has created \u201cthe biggest energy crisis in history\u201d, according to the International Energy Agency. Violence has consumed other parts of the Middle East, as well as Sudan and Ukraine; populism, nationalism and angry polarisation are rising in the west; debt burdens are sky-high; climate change is accelerating; and the AI revolution that so thrills Silicon Valley titans is also threatening to destroy jobs. Meanwhile, American consumer confidence has slumped to its lowest level on record.<\/p>\n

But that is only one side of the story. We live in a golden age of science, which is not only unleashing a widely discussed revolution in AI but less-noticed miracles in life sciences and green tech. The global economy is still growing by more than 3 per cent a year. And perhaps most surprisingly, America\u2019s stock market has recently been hitting record highs.<\/p><\/blockquote>\n

This is, of course, a trend I have also been noting.<\/p>\n

As she then noted, although 62% of all Americans supposedly own shares, the impression that this gives of a share-owning society is deeply misleading, because only 10 per cent of Americans control 88 per cent of the total value of US shareholdings, and it then has to be understood that at least one third of the value of those holdings is represented by shares in just seven tech companies.<\/span><\/p>\n

Tett then tried to explain why, despite the world around us steadily falling apart, stock markets are not reflecting this.<\/p>\n

She came up with several reasons, including belief in the hype around AI; the belief that, despite everything, stock markets are actually delivering strong returns; and possibly the belief that they have always, ultimately, shrugged off systemic risk.<\/p>\n

She then acknowledged that, as one fund manager told her, there is in reality nowhere else for institutional savers to put their money, and so it just keeps flowing into stock markets, come what may, confirming in the process my belief that what we are seeing is unthinking, and, I think, uncaring, institutional saving that indicates utter indifference on the part of fund managers to the interests of those people whom they are meant to serve.<\/p>\n

Getting a slight nod along the way was a reference to the possibility that this bubble might burst, as evidence for which Gillian Tett quoted the remarks from Sarah Breeden of the Bank of England, which underpinned my video on this issue<\/a> a little over a week ago.<\/p>\n

But, all being said, and this being commentary in the Financial Times, the conclusion could be summarised as \u201cthings are going well because they are, and that\u2019s the way they should be, and always will be\u201d. That was not analysis. It was hype intended to perpetuate the belief that those with what they consider to be wealth, based on quite extraordinary share valuations, will be able to maintain it, come what may.<\/p>\n

The alternative viewpoint came from a newsletter<\/a> that was forwarded to me. I had not heard of the publication before. It's called\u00a0 Prof G Media. Some of the analysis of continuing high US stock markets sounds a bit like Tett:<\/p>\n

There are a couple potential explanations. First, historically,\u00a0wars aren\u2019t\u00a0that<\/em>\u00a0bad for U.S. markets. The U.S. is isolated geographically and insulated by having the largest and most liquid financial markets in the world. During times of uncertainty, the American equity and credit markets are seen as\u00a0safe havens.<\/p>\n

The average U.S. stock market decline during 30 major geopolitical events since 1939 was just\u00a04%, and stocks typically\u00a0bounced back\u00a0within six weeks.<\/p><\/blockquote>\n

And then there was this, which is miucy nore relecenat, because unlike Kett it gets to the core of the issue:<\/p>\n

Consumer spending\u00a0now hinges more on the\u00a0wealthy\u00a0than the middle class, and high-income consumers are less affected by energy costs.<\/p>\n

The top 10% of earners account for\u00a0half\u00a0of consumer spending, or a third of GDP, and the highest-income quintile spends only\u00a02% of their budget\u00a0on\u00a0gasoline. That\u2019s compared with low income households that spend nearly 20% of their budgets on gas.<\/p>\n

I\u2019ve been calling this the ketamine economy.\u00a0Ketamine is dissociative. You leave your body and watch your life from the outside. That\u2019s exactly what the Dow and the Nasdaq do. They give the\u00a0illusion\u00a0that society is doing well, but they\u2019re not a measure of prosperity. They\u2019re a proxy for earnings and the wealth of the top 10%.<\/p>\n

Think about what\u2019s actually driving this market. Fifty percent of consumer spending comes from the top 10%. Do they care that gas is $6 a gallon?\u00a0It doesn\u2019t register.\u00a0Tech dominates the market indexes. What does chaos in the Strait of Hormuz do to Nvidia\u2019s margins?\u00a0Nothing.<\/p><\/blockquote>\n

This, I suggest, is what analysis does look like. What is being suggested is that those with wealth are living in a bubble, supported by their already disproportionate earnings, which are then artificially inflated by high share prices. These are pumped by mindless institutional saving of the sort I noted above. The consuenqce is that those whio beenfit opersonally from this are so removed from the reality of life that the potential shock heading our way, including to fuel, energy, and food prices, is something they have become quite unable to identify, even if they wanted to, which is not their inclination because they are all too happy with the pretence that Gillian Tett wishes to perpetuate, that all is well in the world.<\/p>\n

The consequence is, as Prof G Media put it, that these people are living in what looks like a drug-crazed bubble where, so long as the money keeps flowing and the valuations keep rising, reality can be so easily ignored, and this is precisely what they do.<\/p>\n

The problem for the rest of us is twofold.<\/p>\n

The first is that these are the people who also tend to have the most power in the world, and they are the people who are at present most shaping our politics.<\/p>\n

The second is that I am told you can come down from ketamine. Bubbles burst, in other words. Reality can invade. And that will happen here.<\/p>\n","protected":false},"excerpt":{"rendered":"

I read two articles yesterday on stock markets and their detachment from reality. The first was in the Financial Times, and was by Gillian Tett,
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