If you’ve been around markets long enough, you’ll have noticed something uncomfortable. Excess doesn’t correct the way it used to.

What once took a nudge now takes a shove. What once deflated slowly now snaps and what once looked obviously unstable can persist far longer than feels reasonable - right up until it doesn’t.

The lazy explanation is behavioural; too much greed, too much leverage and too much complacency. It’s a comforting story because it suggests the solution is simply “better discipline”. The harder truth is structural.

Markets haven’t become more irrational; they’ve simply become more insulated. Protected from small consequences, buffered against early discomfort, and increasingly resistant to gentle correction.

 

When small signals stopped working

There was a time when markets were far more sensitive to modest changes:

· A slight rise in rates

· A shift in policy tone

· A withdrawal of marginal liquidity

All once enough to change behaviour: risk repriced, leverage backed off, and narratives cooled. Unfortunately, that sensitivity has faded.

Today, early warnings are absorbed rather than acted on. Mild tightening is dismissed as temporary, while policy signals are second-guessed, diluted, or simply ignored.

So by the time behaviour genuinely changes, the move has to be so forceful that it can’t be explained away. Hence, the need for ever-thicker needles.

 

Liquidity stopped being cyclical and became structural

This didn’t happen overnight either, and it wasn’t malicious. It happened because every crisis demanded a response, and each response quietly reset expectations.

Central bank balance sheets expanded to deal with emergencies and never really went back. Asset purchases lingered, while liquidity facilities became permanent features rather than temporary tools.

Over time, markets learned something important: that more and more discomfort could be managed.

But that lesson didn’t eliminate risk; it simply delayed recognition, raising the threshold for what counts as “serious enough” to matter.

When liquidity is structural, small shocks simply don’t register.

 

Passive capital smoothed the warning signs

At the same time, the composition of capital changed.

A growing share of the market doesn’t react to valuation, narrative, or even fundamentals in real time. It responds to flows, volatility triggers, and index mechanics.

This can have a beneficial calming effect, until it doesn’t, and reality hits home.

In modern markets:

· Early stress signals are dampened

· Price discovery becomes less informative

· Risk accumulates quietly beneath the surface

When these strategies are finally forced to adjust, to release pent-up pressure, they don’t do so gradually. They move together, and the impact can be catastrophic.

That’s why modern bubbles don’t unwind neatly; instead, they hold, stretching, and then finally snapping.

 

Policy credibility now does too much work

Another uncomfortable reality is that policy credibility now carries more weight than it was ever intended to.

Central banks are expected to manage inflation, preserve financial stability, accommodate fiscal reality, and avoid political fallout, often simultaneously. That makes early, modest tightening difficult.

Today, small moves don’t convince markets that behaviour actually needs to change. So action is delayed, but when it finally comes, it has to be decisive just to be believed.

The result is not fewer corrections, but sharper ones.

 

Why experienced investors don’t look for pinpricks

This is where the value of experience really shows.

When minor warnings are routinely absorbed, you naturally stop looking for pinpricks. Instead, you start watching the pressure points, where leverage is hidden rather than visible, where liquidity is taken for granted, and where stories depend more on policy support than on cash flow.

Not because you’re predicting collapse, but because you’ve learned how this system now corrects itself.

 

The uncomfortable conclusion

We don’t live in an age of more bubbles because investors are naïve or have suddenly forgotten how risk works. Most participants understand the trade-offs they’re making.

We live in an age of harder-to-burst bubbles because the system itself has evolved to absorb stress, smooth early warnings, and protect itself from small corrections - right up until it can’t.

 And when that protection finally fails, the adjustment doesn’t come from a thin needle. It comes from a larger, more forceful one, precisely because so much pressure has been allowed to build unnoticed.

 

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