MARKET PERSPECTIVE

By J Mulraj

Oct 24-30, 2026

In a world of such turmoil

Image created using ChatGPT

The world, today, is a fragile structure, resembling a house of cards. It can be brought down by a wisp of air, a gust of breeze or the prod of a myopic leader.

The never ending wars between Russia-Ukraine, which began in Feb ‘22, has lasted 4 years and 8 months, and, with both sides attacking oil infrastructure, and between USA-Iran, which started end February 2026, with both sides blockading the Strait of Hormuz, through which a fifth of oil trade passes, have cause oil prices to shoot up, to, now, $ 112/barrel.

Rising oil prices percolate through to all items of manufacture, triggering rising inflation. To tame which, central banks raise interest rates, which hurt borrowers. That lowers demand, especially for housing. The residential construction industry provides 3.2 million jobs.

The unexpected turn of events was popularised by Benjamin Franklin in a rhyme which said for want of a nail, the shoe was lost, for want of a shoe, the horse was lost, for want of a horse, the rider was lost, for want of the rider, the battle was lost, for want of a battle, the war was lost, and all for the want of a horseshoe nail’.

Unless such jingoism stops among the global polity, it will be the world that will be lost.

For want of common sense, Planet Earth was lost!

Wars are costly, with money being spent on destruction of lives and assets. Leaders hate to raise taxes to fund them, for fear of losing their seats, and turn to debt to finance wars. The rising debt has it’s own concatenation of events. It leads to a need for Governments to pare expenditure. When they make unpopular cuts, as Macron did recently, cutting expenses on teachers and school facilities, there was a violent student protest and rioting.

All these events are fodder for a bear, not for a bull. Other than US stockmarkets and London, which are less than 3% below their peaks, others have fallen further. Hang Seng 6%, Nikkei 11%, and Nifty 13%. The US markets are propped up by AI investment and expectations.

Investor expectations for frontier AI companies will be tested, likely in the week of November 16, when Anthropic is expected to make it’s IPO. The estimated valuation is $ 1.5 trillion, the largest ever. And oh! Anthropic is making losses! On the other hand, it is growing rapidly. But if investors expect a 15% return on equity then, at a valuation of $ 1.5 trillion, Anthropic should be able to generate a PAT of $ 225 billion. No company has, so far, been able to reach anywhere near that.

Valuation expert Ashwath Damodaran, in this excellent analysis, values Anthropic at just under $ 150 b. He, however, dislikes it’s governance structure. It has 5 classes of shares, one of which gives the seven founders a disproportionate 51% of voting rights. The normal shareholders, getting in during the IPO, will have 1 vote per share. The second class are employee shares, with voting roghts limited to changes that affect the benefit trust. Then there are corporate shares issued to Google and Amazon, which grant economic benefits but no voting rights. Then there are shares held by the benefit trust, which give the power to those shareholders to elect a majority of the board of directors, and oversee the public benefit mission. And, finally the founder shares under which the seven founders will have voting rights to 50.1% of the shares.

Anthropic has been registered, under Delaware law, as a public benefit corporation. Under this, the Board of Directors is entitled to make decisions that results in shareholders becoming worse off and can’t be sued for them.

So, if the Anthropic IPO does not attract investor interest, and dents the AI story, there would be a huge risk to the US markets, and hence to other markets which have already dropped more.

Last week the BSE Sensex closed at 74459, up 1336 points over the week.

In the coming week we will have the US mid term elections on November 3. It is expected that the Republicans will lose majority in the Congress, and will have a close race in the Senate.

The various risk factors do, however, present a vulnerable house of cards, as the image depicts. Selling may be considered.

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Comments can be emailed to: jmulraj@asiaconverge.com
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