Arab Press

بالشعب و للشعب
Wednesday, Apr 01, 2026

0:00
0:00

We’ve not seen the end of stock market corrections or inflation

While investors flock to the tech sector, the persistent underinvestment in the real economy, such as commodities-related infrastructure, is now pushing up prices. At the same time, the factors driving the bull market – robust growth, rising corporate profits and buoyant financial liquidity – are no longer in play.

Call it the “hope springs eternal” or the “bigger fool” syndrome; either way, the idea being put about now by some stock pushers that markets may have hit the bottom or that inflation has peaked serves only to indicate the depth of their ignorance about what’s really going on in the global economy.

It’s high time they shed their belief that financial markets are predictable, rational or efficient and that some mysterious “hidden hand” guides markets towards an optimum allocation of resources. This is a dangerous myth that flies in the face of reality.

Consider, for example, a primary and yet largely unappreciated factor behind the recent surge in global inflation. Covid-19 and the Ukraine war are the usual suspects but, in fact, a huge deficit of investment in commodity production over many years is pushing prices through the roof.


The war in Ukraine has been one factor driving up prices of commodities but it’s not the only one.


Kenneth Courtis, former vice-chairman of Goldman Sachs Asia and chairman of commodity traders Starfort Investment Holdings, is expected to address this phenomenon in a speech at the upcoming 2022 Qingdao Global Venture Capital Conference in China. It deserves attention from the “inflation has peaked” dreamers.

What has this to do with stock markets? It is precisely because markets do such a poor job in directing savings into long-term investment that the current commodity crisis has developed. The same can be said of the massive deficits in funding to address climate change, and infrastructure and healthcare needs.

The fact that the tech boom has now become a “tech wreck” is a serious indictment of the failure of stock markets to allocate capital in a socially responsible way, and of their preference to indulge in hysterical orgies of speculation on glamour stocks and high-rolling entrepreneurs.

Yet another example of this short-sightedness – and another boom threatening to go bust – is ESG (environment, social and governance) investment. ESG funds have attracted vast amounts of investment in recent times and are now attracting attention from crimebusters worried about “greenwashing”.

There is no room here to go into detail on any of these gigantic excesses and failures of judgment, beyond saying that they all illustrate the damage created when sober analysis of socioeconomic and financial factors is usurped by a misguided faith in the infallibility of the marketplace.

Despite all this, the desire on the part of many commentators to gloss over the fundamental and structural failures of stock markets to provide a sound foundation for a nation’s finance would be awe-inspiring if it were not abysmal. They can only think of markets “getting back to business” again.

When analysts talk about stock markets, they are usually talking about Wall Street (just as, when they talk about inflation, they’re normally referring to US inflation). This is justified only in that Wall Street towers above others and its greed and fear-driven short-termism have become universal.

Pedestrians pass by the New York Stock Exchange in Manhattan, New York, on May 5.


A market plunge was inevitable once the tide of central bank liquidity began to recede. But now that there has been a modest correction, many people seem eager to persuade themselves that it is almost over, that markets are “bottoming out”, instead of trying to understand why this cannot be so.

There are three primary factors that have driven the bull market in stocks, which lasted for nearly a decade until a few months ago. These are: robust economic growth, consumption and investment; rising corporate profits; and buoyant financial liquidity. None of these are present any longer.

It is logical to expect market indices to continue falling, with the descent rate accelerating as anticipated recovery fails to materialise. The S&P 500 index may have corrected by some 20 per cent but it had risen by a staggering 90 per cent in the three years to 2021 – hardly a “correction”.

Meanwhile, inflation will continue to rise, as data from the European Union and the UK indicate (even if economist Paul Krugman is suggesting, rather improbably, that it may have peaked in the US). And that brings us back to the role that commodity prices are playing in inflation.

Shoppers walk along Oxford Street in London, on May 20. Inflation in the UK soared to 9 per cent in April, the highest rate in 40 years.


As Courtis observed in the speech notes he shared with me, for two decades investment has been skewed to hi-tech and high-growth digital sectors. Companies with scant earnings prospects have been bid up to astronomical valuations, generating enormous returns. But core innovations have now reached their limits.

Investors shunned the old economy and the “real stuff” such as commodities-related infrastructure, ports, railways, refineries, food processing, mines and smelters. The result has been two decades of underinvestment in sectors which are the very basics of life.

As Courtis noted, we now find ourselves in the precarious situation where we have so underinvested in the basics of the economy that we have started running into significant supply constraints in the production of energy, metals, agricultural products and related capacity.

The message, then, for stock markets is not to expect a return to anything like the status quo ante. First, there has to be a thorough shake-out of “new economy” detritus and then large-scale new investment in “old economy” essentials. Getting back to basics will be painful but salutary.

Newsletter

Related Articles

Arab Press
0:00
0:00
Close
Saudi Arabia Updates Travel Advisory as Regional Conflict Intensifies
Saudi Arabia’s Sadara Suspends Petrochemical Production as Conflict Disrupts Operations
Iran Urges Saudi Arabia to Remove US Forces Amid Escalating Regional Tensions
Gulf Allies Urge Trump to Sustain Campaign Until Iran Is Fully Defeated
Saudi Arabia Unveils Strategic Rail Freight Corridors Connecting Gulf Ports to Jordan
Saudi Arabia Intercepts Drones and Ballistic Missiles in Major Defensive Operation
Houthi Escalation Opens New Front in Expanding Iran-Linked Conflict
Major Saudi Chemical Plant Halts Operations Amid Regional Conflict Disruptions
Strike on US Radar Aircraft in Saudi Arabia Signals Escalating Threat Capabilities
US Citizens in Saudi Arabia Advised to Shelter Indoors Amid Rising Regional Tensions
How Britain’s Prime Minister Controls U.S. Bomber Access in Escalating Iran Conflict
Saudi Arabia Urges Trump to Lead Strategic Reset in Middle East as UAE Weighs Ground Role
Reed Smith Expands Saudi Presence with Senior Corporate Appointments
Trump Announces Approval of F-35 Fighter Jet Sale to Saudi Arabia
BBC Faces Scrutiny Over Allegations of Paid Content Linked to Saudi Arabia
Ukraine Secures Defense Agreements with Qatar and Saudi Arabia as UAE Talks Advance
Oil Prices Surge as Saudi Arabia Adjusts Supply Amid Escalating Iran Tensions
Saudi Arabia Condemns Attacks on Kurdistan Leaders and Reaffirms Backing for Iraq’s Stability
Saudi Arabia Weighs Strategic Interests as Iran Conflict Raises Regional Stakes
Severe Thunderstorms Sweep Across UAE and Saudi Arabia Bringing Heavy Rainfall
Trump’s Strategic Alignment with Saudi Arabia Reflects Expanding Economic and Diplomatic Synergy
Saudi Arabia Strongly Condemns Attacks on Presidential Residences in Hawler
Saudi Stocks Edge Lower as Tadawul Index Closes Slightly Down
Houthis Enter Expanding Iran Conflict as US Deploys Additional Troops
Iran Seeks Assurances for Regional Allies as Saudi Arabia Presses for Firm Security Guarantees
Iranian Strike Reportedly Destroys $270 Million US E-3 Sentry Aircraft at Saudi Air Base
Iranian Strike on Saudi Base Leaves Ten American Personnel Injured
Ukraine Claims Russia Shared Satellite Intelligence with Iran Ahead of Saudi Base Strike
Pakistan Engages Regional Powers in Diplomatic Talks Over Iran Conflict
Escalating Iran Conflict Brings Renewed Focus to US Military Presence in Saudi Arabia
Iranian Strike Targets Saudi Airbase, Damaging Key US Military Assets
Modi and Saudi Crown Prince Emphasise Secure Shipping Routes in Talks on West Asia Conflict
Dallas-Based Company Secures One Billion Dollar Hotel Development Deal in Saudi Arabia
Zelensky Secures Defence Cooperation Deals with Gulf States During Strategic Regional Tour
Trump Calls on Saudi Arabia to Join Abraham Accords in Push for Expanded Middle East Cooperation
Trump Balances Humor and Praise in Remarks on Saudi Crown Prince
Saudi Arabia’s Strategic Pipeline Reaches Seven Million Barrel Capacity to Bypass Hormuz
Rubio Signals U.S. Could Conclude Iran Conflict Within Weeks as Air Campaign Intensifies
More Than a Dozen U.S. Soldiers Injured in Saudi Base Attack as Iran-Backed Houthis Expand Conflict
Iranian Strike on US Base in Saudi Arabia Injures Troops and Damages Aircraft
Pakistan to Convene Regional Talks with Saudi Arabia, Turkey and Egypt Amid Iran War Diplomacy
Ukraine and Saudi Arabia Reach ‘Mutually Beneficial’ Defence Agreement
Ukraine to Share Battlefield Expertise with Saudi Arabia Under New Defence Agreement
Trump Takes Center Stage at Saudi Arabia’s FII Miami Amid Escalating Iran Conflict
Gulf States Explore Pipeline Routes to Bypass Strait of Hormuz Amid Rising Tensions
Iran Conflict Drives Saudi Arabia to Deepen Security Ties with Ukraine
Saudi Arabia Reviews Desert Ski Resort Plans with Cancellation of Key Building Contracts
Saudi Arabia Targets Business Hotel Shortfall with $1 Billion Development Push
Iran and Allied Forces Intensify Strikes on Energy Sites and Urban Areas Across Region
Ukraine and Saudi Arabia Formalise Defence Cooperation Agreement, Zelenskiy Announces
×