The market makes no sense—or does it?

The market is a voting and a weighing machine

Benjamin Graham, Warren Buffett’s mentor and the father of value investing famously said that in the short run, the market is a voting machine but in the long run, it is a weighing machine.  

A war in the Middle East is still raging on as the one in Ukraine remains unresolved. With an oil price spike and sticky inflation keeping interest rates elevated, the world was concerned that we may be entering a period of stagflation. And yet, no one could have predicted that the global stock markets would have just hit another all-time high. 

There is always a temptation to say the market doesn’t make sense and that this is irrational. However, once you understand what is actually driving prices, it makes a great deal of sense. It is earnings. 

Over more than three decades of investing, I have watched many cycles pass, and the same lesson reassert itself. To rephrase Graham: in the short run, markets respond to headlines; in the long run they track fundamentals. The best representation of the fundamentals that truly matter is not GDP growth, but corporate profits. 

It’s all about earnings and they keep rising

Twelve-month forward earnings estimates for the S&P 500 have been silently grinding higher even as oil spiked, the Iran conflict rumbled on, and central banks held rates steady. The “earnings recession” predicted in 2022, the “double dip” in 2024, and the “AI bubble pop” in 2025 have not materialised. The largest, most profitable, most globally dominant companies on earth have continued to compound not just their returns but also their earnings.

This is not a coincidence. The top ranked companies in major global indices have already passed an unusually demanding test—the ability to grow both their top and bottom lines, to secure pricing power in inflationary environments, and fortress balance sheets that not only absorb higher rates but may even benefit from periods of higher inflation. They also happen to stand at the centre of the global AI-driven productivity shift, where scale, capital, talent and proprietary data compound on themselves.

During World War II—with much of Europe occupied and the outcome of the war genuinely in doubt—the U.S. stock market bottomed in 1942 and went on to begin a 20-year secular bull market. 

Markets are not callous to human suffering; they are answering a different question: which companies will still be generating cash flows ten years from now? Today’s index leaders give a confident answer. When inflation and interest rates remain elevated, equities are arguably the best place to be—provided you own businesses that can pass costs on, defend margins and reinvest at high rates of return. That is what indices do —they are overweight in the winners.

Concentration is not the risk

Here is the catch. The same mechanism that has rewarded passive investors so handsomely has also produced the most concentrated U.S. equity market in modern history. The Magnificent Seven account for approximately a third of the S&P 500, and a meaningful share of any global index. 

However, we know that the argument that this is not the norm falls flat on its face when we look closer to home. DBS is roughly a quarter of the STI, and the three large local banks together represent more than half the index. Samsung Electronics and Hynix now account for 40% of the KOSPI index. 

Concentration should not be a reason to panic. It should push us to think more clearly. The lesson of institutional and endowment-style investing is not to avoid the winners; it is to make sure your portfolio is not silently betting on only one outcome for one country, one sector, and one technological wave. Diversification is not a hedge against having been right. It is insurance against the version of the future you did not predict.

Asia’s place in the value-up momentum

Asia is undergoing a structural “value-up” moment, and Singapore is now part of it. Markets such as Korea, Japan and Singapore have significantly lagged the US in the past decade. That gap is not an accident of geography—the governance discount has been real and measurable. The reform agendas in Japan and Korea have been targeting precisely this, and they are working.

Japan started in 2014 with the Stewardship Code, and in 2023 the Tokyo Stock Exchange directed companies trading below book value to disclose capital efficiency plans. Korea launched its Corporate Value-Up Programme in 2024, with Commercial Code amendments in 2025 and reduction of dividend tax from 45% to a 14–30% range, dismantling one of the core incentives for suppressed payout ratios. Korea was the best-performing market of 2025, and continued to be so in 2026 (as of date of publication) despite a temporary drawdown due to the war in the Middle East.

Earlier this year, Singapore joined the club. The Monetary Authority of Singapore’s Equity Market Development Programme deploying S$6.5 billion across multiple asset managers. Their mandates focus on the underexplored corner of our market: Singapore-listed small- and mid-cap stocks.

The crucial distinction is that Japan and Korea pursued mostly supply-side reform. Singapore, on the other hand, is intervening directly on the demand side too. The STI crossed 5,000 for the first time in February 2026 and returned 26.1% annualised over 2024–2025, outpacing the S&P 500 (21.4%). However, the gap widens as a Singapore-based investor when you factor in currencies. 

This is not a Singapore equities pitch. The point is that the global opportunity set is broader than the U.S. tech complex, and that the same evidence-based discipline that tells us to stay invested in the AI winners also tells us to maintain meaningful exposure to a broader Asia, where governance reform, valuation discounts and a clear policy-driven tailwind are starting to compound.

Companies are staying private for longer

There is one more piece. Some of the most consequential companies of this decade are choosing to remain private for longer. SpaceX is reportedly seeking a valuation near US$2 trillion. OpenAI was last valued at US$852 billion. Anthropic’s valuation is being discussed in the US$900 billion range. That is close to four trillion dollars of value invisible to anyone who only invests in public markets. 

The answer is not to chase any single private name; it is to think in terms of asset classes. Through evergreen private equity vehicles from globally leading managers and through hybrid public-private “crossover” funds which intentionally invest across the lifecycle of innovation, individual investors can now access the same opportunity set that Yale and Harvard Endowments have used to compound at superior risk-adjusted returns for decades. 

What does the science of wealth tell us about market highs?

It tells us markets are not detached from reality—earnings are reality, and they are still rising. It tells us that the best companies are scrutinised daily, and when they rise to the top, then they deserve to dominate the index. That said, no investor should let any one country, sector, or set of seven stocks become their entire thesis. 

It tells us that Japan, Korea, and now Singapore are reminding the world that value is not extinct—it can also be unlocked, deliberately, by policy. And it tells us that some of the future’s biggest winners may never appear in your index fund unless you decide, on purpose, to go and meet them. 

When markets reach a new high, they do not subsequently fall. Historically, they go on to make another new high, so don’t fight the market. 

The investors who do best from here will not be the ones who correctly predict whether AI takes over or geopolitics derails it. They will be the ones who own a thoughtfully diversified slice of the world’s most profitable businesses—public and private, American and Asian—in proportions that match the goals they actually have.