For whom the bell tolls
John Donne's famous line, later borrowed by Hemingway, is usually remembered as a meditation on death. What is often forgotten is that it was also a meditation on attention.
Historically, church bells functioned as a mass-communication system to announce any form of breaking news. Whether it was a birth, death, emergency or new arrivals, the bell rang because something had happened that the community needed to know. Recently, it has felt as though bells have been sounding from every quarter.
Nvidia, now down 25% over the past month, has prompted a different set of questions than investors have become accustomed to asking. At the same time, political developments in the United States suggest that public enthusiasm for an AI-driven future may be less unanimous than markets have assumed.
Markets have always produced enough controversies to fill a newsroom and to no one's surprise, politics remains an endless theatre of ambition and disappointment. However, there are moments when seemingly unrelated stories start to appear like fragments of a larger one.
The mood of the past few years in markets has been one of confidence, gradually morphing into a sense of inevitability. Investors will know the prevailing narrative well. AI will transform the economy, Nvidia will supply the picks and shovels and the hyperscalers are willing to spend whatever necessary to secure their advantage. Eventually, these immense expenses will all be justified by significant productivity gains. Investors may disagree on valuations, timelines and beneficiaries, but far fewer question the direction itself. The trouble often begins when a hypothesis ceases to be questioned.
None of this is to suggest that artificial intelligence is a passing fad. I find that history offers very little support for that conclusion. The internet transformed modern life so completely that I often struggle to imagine a world in which accessing information required patience.
In this sense, the technology itself was rarely the source of the misunderstanding. Rather, investors consistently struggled to distinguish between a revolutionary innovation and a sound investment. The former is usually much more obvious.
What strikes me as most interesting is not the technology itself, but the behaviour surrounding it. One of the more curious developments has been the increasingly frantic search for capital across the AI ecosystem. Though funding remains abundant, the appetite for capital simply continues to expand.
Against that backdrop, the growing enthusiasm around public listings feels noteworthy. Such events are often treated as milestones of ambition and the natural progression of successful companies. Often they are. Yet I cannot help wondering whether some of the recent manoeuvring in the industry reflects confidence or concern. Things are not always as romantic as they seem. Public markets have also historically functioned as a liquidity event for early investors and employees seeking an exit.
None of these developments constitute a crisis or entire collapse of conviction. I prefer to make observations rather than predictions. However, what these events collectively suggest is that the extraordinary confidence which has characterised recent years may no longer be quite as secure. Ultimately, that may be what the bells are signalling.
Donne understood that uncertainty has always been a communal experience. Investors (despite their frequent attempts to convince themselves otherwise) remain part of a similar community.
Simonelle Mody
Also in this week's edition...
Retirees can be reluctant to draw on their savings due to fear of running out. David Bell and Geoff Warren propose an additional retirement savings account that Australia should have.
The Democrats have regained control of Congress and shifted the equation in Washington. Shane Oliver returns to discuss the implications of the US midterm results for investors.
A reader's query about the recent CGT reforms has raised a bigger issue. Tony Dillions asks whether policymakers are forgetting to reward investors for taking on risk.
Rising yields have made bonds attractive again, but the team at Fidelity Australia argue that the role they play in a portfolio has become more complicated.
Signs of a recovery are emerging for dividend investors. Marc Jocum explores the important trade-off that investors face when seeking yield and building reliable income.
The market has delivered some of the strongest returns have arrived when the outlook seemed least attractive. Jason Teh explains why 'overvalued' has been such an expensive word for portfolios.
Investor obsession with AI is attracting unprecedented amounts of capital and confidence. Satyajit Das questions whether the enthusiasm is a good kind of bubble or simply a bubble.
Curated by Simonelle Mody and Leisa Bell
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