Over the past several years, financial markets have been fuelled as much by expectation as by execution,but not anymore. This is no longer a theoretical environment. The real cost of capital is once again shapingbehaviour. Fiscal deficits are no longer abstract. Power grids, supply chains, labour markets and political systems are being tested by the physical and financial limits of the world they must now support.

Is this the top of the market? Should I get out? These are probably the biggest questions investors areasking today. Makes sense. The S&P 500 and the Nasdaq are at, or near, all-time highs, largely driven bya very narrow group of mega-cap tech and AI-related themes. Some may be wondering whether all thistech euphoria seems a little too reminiscent of the 2000 Tech Wreck.

Many of the risks that were top-of-mind at the start of 2024 are still here. Worries about deglobalization have turned into worries about global trade conflict. U.S. trade negotiations are ongoing, the Mag-7 stock shave, following the sharp sell-off in April, led a V-shaped rally in U.S. equities. And the risk of regional conflict today is higher than it’s been in the past four decades, as regional players try to fill the void created by increased U.S. isolationism, and tilt the geopolitical environment in their favour.