Macroscope | The real reason stock markets are still flying high despite grave risks

Financial markets, stock markets especially, appear able to defy gravity despite the global geopolitical and economic situation. A plethora of institutional and individual explanations have been offered as to why, but most seem to miss the point.

Which is, at least in part, that we have created a kind of monster in the asset management

industry, which channels a glut of global savings into a limited number of investment areas and which, by virtue of these captive inflows, is able to maintain asset valuations at record highs.

The value of global assets under management is set to rewrite records, with PricewaterhouseCoopers expecting the figure to rise from nearly US$140 trillion in 2024 to US$200 trillion by 2030. McKinsey, which puts the 2024 figure at US$135 trillion, said this had grown to US$147 trillion in mid-2025.

This represents power indeed to influence share prices. The benchmark S&P 500 index has soared to record highs in recent days as has the tech-heavy Nasdaq index, while Japanese stocks have also soared to new highs with the benchmark Nikkei Stock Average briefly rising above the 60,000 mark for the first time.

All kinds of superficial explanations are on offer as to why stock markets are again displaying what former US Federal Reserve chairman Alan Greenspan called “irrational exuberance”.