The single greatest force driving modern economies, society and politics is scalability
It is the common narrative underlying the dominance of big tech, through to the teen mental health crisis and the rise of political polarization and populism
Markets tend to treat scale as a largely linear concept
But human systems change character at scale – and ultimately have breaking points
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The exuberance in risk assets is less a consequence of a stronger economy than a driver of it
The expectation of rate easing was never critical – which is why the exuberance has largely persisted even as yields have backed up
It is instead the direct consequence of investor crowding following easy central bank balance sheet policy – and vulnerable to any reduction in CB liquidity
Is the mini-correction in markets a foretaste of something bigger, or does the still-strong real economy give risk assets scope to bounce back?
Should investors be rotating out of equities and into bonds, or are the latter still vulnerable to buyers’ strikes against a backdrop of fiscal indiscipline?
