Advertisement
Banking & finance
OpinionWorld Opinion
Andrew Sheng
Opinion
Andrew Sheng

AI has been known to hallucinate. So have financial markets

Stock markets are booming on the assumption that US tech giants will deliver, but as liquidity becomes scarce, a reality check will ensue

3-MIN READ3-MIN
1
Listen
A sign displays outside Nasdaq on the day of SpaceX’s initial public offering in New York on June 12. Photo: Reuters
Andrew Sheng
Andrew Sheng is a former central banker and financial regulator, currently distinguished fellow at the Asia Global Institute, University of Hong Kong.
We’ve never had it so good. The S&P 500 and Nikkei 225 have hit record highs this month. SpaceX had its spectacular initial public offering, the largest in history. The company raised an eye-popping US$75 billion and saw a sharp rise in its share price to a mind-blowing valuation of US$2.5 trillion in two days. The US-Iran deal on reopening the Strait of Hormuz caused petrol prices to drop back to below US$4 per gallon.

Global stock markets are creating seemingly unstoppable wealth for investors. Last month, bull investor Ed Yardeni raised his year-end S&P 500 Index target from 7,700 to 8,250. US companies are still recording bumper profits, driven by artificial intelligence (AI), financial and consumer giants.

Let’s connect some dots in the boom or bust noise that could cast doubt on market enthusiasm.

First, the doomsayers are flagging warning signals. According to the World Bank’s projections, global gross domestic product growth will slow to 2.5 per cent in 2026, down from 2.9 per cent last year, mainly due to the conflict in the Middle East and higher oil prices. Economist Steve Hanke has drawn attention to debt levels and monetary policy in advanced economies, saying warning signs are flashing red.

Select Voice
Select Speed
1x
AI-generated voice