Rising market instability looks inevitable as the AI meltdown, the US Midterms and European political riots, and the geopolitical risks from the US vs China hegemonic challenge reach crisis points concurrently. It’s a classic Three Body Problem – making it almost impossible to logically predict what happens next. Sit back and watch for the opportunities – they will emerge, but not where you expect them.

The US treasury market is the deepest and most liquid market on the planet. But over the last year, foreign investors have been walking away. Why? Is it simply fear of a bear market from rising inflation and the rising quantum of US debt, or the sheer scale of the refinancing required. Or is it more fundamental in terms of geopolitics, a changing investment market, and better returns elsewhere. If so, it’s a lesson every country should absorb.

AI is changing the world. It’s the greatest new, new thing ever… since the last new, new thing and till the next new, new thing emerges. Given all the risks around business adoption, growth, the bursting bubble in NeoCloud debt, and AI competition, can you really justify a $1.5 trillion valuation for Anthropic, a firm that recorded a $81 bln loss over the first half of this year!

Markets have a habit of watching the wrong things – which why they are repeatedly shocked by No-See-Ums. Perhaps, the real issue isn’t how economies miss growth or inflation targets, but how miserable or unhappy the electorate becomes? Traditional politics are failing in the democratic nations, while populism is set to create wider instabilities. Maybe it’s time to go “forest bathing” in the autumnal glory and focus on resiliency and satisfaction?

It’s been a bad week in the AI markets. Suddenly folk are waking up to the growing gap between inflated expectations and disappointing revenues, and the risks which include competition. It’s a pattern that reoccurs repeatedly in markets. The name to watch will be CoreWeave – illustrating what can go wrong when blithe assumptions about fantabulous upside ignore the rules of financial commonsense. A default or troubling rescue is on the cards.

Should Donald Trump have won the Nobel Prize in Economics? His groundbreaking work on instability and unpredictability, and how naked greed and connections can drive economic growth and prosperity exposes the fundamental weakness of liberal, woke societies. Should economies be driven by innovation and productivity, or by political connections and favour?

Just how much money is the AI boom going to make? No one really knows, but everyone is placing their bets. AI dominates the stock markets, but is beginning to worry many investors in terms of likely returns. While AI technologies are changing the world, what we see today may not be what we get tomorrow if new technologies emerge, and the current valuation metrics change. AI may be distracting us from real economic impacts elsewhere – like shipping costs.

The equity rally to yet new all-time-highs feels unconvincing. Expectations of inflationary pressures easing and a return to upside growth are not shared by bond markets which are concerned at signals of higher borrowing costs as governments fail to rein in fiscal programmes. A fall in oil prices will help but won’t solve anything.

The threat list to markets has suddenly expanded – plague, protests and increasing signs the AI boom is a damp squib. However, Sporting Investment remains a hot sector – which may require some tweaking as the full implications of the Man City financial scandal emerge. Durable sporting value requires sound corporate governance, managing the money to ensure competitive integrity, a growing and excited audience, and a clear flow of players from the grass-roots to the big leagues.

This morning something different. A review of Robin Wigglesworth’s new book, A Fabulous Debt, on the history of the Bond Markets. Great read and absorbing. It’s a broad brush explaining how bonds have evolved and developed. Bond markets guide far more than just interest rates – they are power, political stability, and can drive market instability. In Bonds there is truth. The book leave interested readers wanting to know more in terms of the consequences of the Bond Markets and mechanisms.