Investors appear to be growing weary of obvious nonsense 

Financial Times UK 1 Aug 2026 Katie Mar tin katie.mar tin@ft.com 

Given the explo sion in excite ment about ancient Greek legends and myths, it is fit ting that this week sev eral key prot ag on ists in fin an cial mar kets have, Icarus-style, flown too close to the sun. 

Dazzled by ambi tion and hubris, and con vinced of their invin cib il ity, people as diverse as South Korean day traders and the world’s most power ful cent ral banker have been singed from the fierce heat of real ity. None of this is a sur prise, as such. Some of these reck on ings were heav ily advert ised in advance. (If you have a work ing know ledge of mar kets and did not real ise Korean stocks were over heat ing, then I have bad news for you about Santa Claus and the Easter bunny.) 

But to me, it is an indic a tion that investors are finally show ing signs of grow ing weary of the pain fully obvi ous non sense. The mas ters of hype are still doing what they do best. The real ity, though, is that bond mar kets are caught in a per il ous dance, big stock mar ket indices have been flat lining for weeks, and froth is get ting knocked off the top. Froth i est among equals is hedge fund Situ ational Aware ness. 

Nam ing a hedge fund demands you con vey con fid ence, a sense of resi li ence, but also just enough star dust to indic ate exclus iv ity. Gen er ally, the res ult is a hack neyed com bin a tion of rocks, forests and sea sons. Not so for Leo pold Aschen bren ner, the 24year-old wun der kind who named his fund after a 165-page essay he wrote on the trans form a tional power of AI. 

This week it turned out his situ ational aware ness did not extend to under stand ing the destruct ive power of lever age when bets go bad. It’s great on the way up, as evid enced by his 400 per cent returns in the first half of this year. But when his favoured tech bets took a hit in the past few weeks, calls from his banks demand ing cash led to him selling the bulk of his port fo lio to Ken Griffin, the embod i ment of the Wall Street estab lish ment. 

Aschenbrenner will no doubt fight another day. But this is pre cisely the risk that staid insti tu tions like the Bank of Eng land have been warn ing about of late. Soaraway spec u lat ive bets fun ded with bor rowed money have been all the rage, and they simply never end well.

The fizz has also come off Korean stocks, which have provided one of the wilder rides of 2026, on the heels of shares in semi con ductor com pan ies. The Korean stocks index surged 150 per cent higher from Janu ary to late June, with the lat ter phase of the ascent fuelled by a pro lif er a tion of lever aged funds, but has now given up nearly half of those gains. Ordin ary investors caught up in the frenzy are feel ing the pain, with one telling the FT this week that her life is “screwed”. Korean author it ies have now clamped down on the risky retail funds — too late, it seems, for hun dreds of thou sands of investors. 

The forces behind the dis tress at Situ ational Aware ness and the much sor rier tale of Korea’s have-a-go investors were grimly pre dict able, and indeed widely pre dicted: a dream of massive easy riches, perched on bor rowed money and sit ting atop a pain fully nar row set of stocks. 

Per haps the stock mar ket list ing of Elon Musk’s SpaceX really did ring a bell at the top of this spec u lat ive mar ket cycle — its shares have now halved in value since their intra day peak in mid-June and are below the start ing price. Mean while, investors are turn ing an increas ingly crit ical eye on the US Fed eral Reserve under Kevin Warsh. 

This week, the Fed kept interest rates on hold as widely expec ted, and prom ised to keep up the fight with infla tion, but long-term US gov ern ment bonds fell heav ily in price non ethe less, with 30year yields — a key input in to mort gage rates — strik ing the highest levels since the fin an cial crisis. Higher bor row ing costs were not part of the prom ised pack age from this new Fed chair. 

This is the mar ket’s way of say ing it can’t wrap its head around the con fid ent mes sage from Warsh. He is try ing to con vey that the Fed is “on the case” on infla tion, as he put it, but his dis taste for “spoon feed ing” mar kets with sig nals of his inten tions means investors are left to fill in the blanks for them selves, leav ing space to sus pect polit ical con sid er a tions may creep in to the Fed chair’s think ing. “The polit ical reac tion func tion is import ant,” said Sal man Ahmed at Fidel ity Inter na tional. “The Fed does not oper ate in a vacuum.” 

Warsh has not crashed to earth here, but investors have demon strated they are will ing to show their teeth. Sooth ing words alone are not enough to turn this around. Investors of all stripes are rejig ging their port fo lios to avoid excesses and faulty assump tions. Retail investors are selling indi vidual stocks, chiefly in the tech sec tor, at the most rapid pace since the Covid crisis, accord ing to research from Vanda. “Tech is tak ing the hit, not the broader mar ket,” Vanda said. 

Mean while, the sup posedly dreary UK stock mar ket, devoid of racy tech names, hit a record high this week. Investors know the hubris has been mount ing and they are look ing for nice, bor ing safety and sta bil ity. This is the best way to avoid get ting singed.