For the past 40 years, free markets were the first answer to almost every economic and social problem. Governments ran cost-benefit analyses, outsourced services, and let the private sector lead. Instead of breaking apart monopolies, they let them grow larger, make more profits, and reduce workers' share of company earnings. That era is ending.
We said it in our report The New Normal two years ago: the days of free trade and free markets are over, and we are heading "back to the future." The future would see more, not less, government intervention in the economy. That has largely come true.
This matters for investors because it changes how you value companies. Imagine trying to price a business where politicians are picking winners and losers. Where governments allow oil exports one week and reverse the decision the next. Where they "ask" you to favour one country over another. How do you value a company that donates to Trump?
The next decade or two may be very difficult for those who rely solely on markets being an accurate reflection of company value. Volatility will be higher as events trigger people to demand more from politicians, and politicians respond with rewards and punishments for sectors and individual companies.
Australian CPI hit 4.6% for the 12 months to March 2026, up sharply from 3.7% in February. It is the highest reading since September 2023. Fuel prices surged 32.8% in March alone, the largest monthly increase since the series began in 2017. Housing inflation sits at 6.5%, transport at 8.9%.
The RBA is widely expected to hike again. The question now is not whether rates go up, but how far unemployment rises in response. That is the number to watch from here.
The ceasefire continues to fray. Markets are increasingly volatile and complacent at the same time, a dangerous combination. China has started bullying Europe over its proposed "Made in Europe" law, threatening unspecified retaliation against any attempt to strengthen European industry at the expense of Chinese companies. Made in China 2025 was good for China. Made in Europe 2035 is apparently bad for everyone else.
Treasurer Jim Chalmers says "intergenerational fairness" will be an important factor in the upcoming federal budget. He says younger people are at risk of being denied the opportunities of those who came before them. Stand by. You are going to hear a lot more of this.
The CAPE has climbed to ~39, up from ~36.5 just weeks ago. It is now inching towards the all-time high of 44.2 set during the dot-com peak. The only two prior periods near these levels were the late 1920s and 2000. Both ended badly.
CAPE data sourced from Robert Shiller, Yale University. Updated weekly.
