Renuka Jain

Slowly. Then All At Once. US Markets rising before bust? “How did you go bankrupt?” Hemingway once wrote. “Two ways. Gradually, then suddenly.” That rhythm doesn’t just describe personal ruin. It describes how entire markets, economies, even societies unravel. Right now, we’re in the gradually stage. Debt is piling up, valuations are stretched, liquidity is tightening. None of these on their own feels like a breaking point. Life goes on. Markets rally. Optimism prevails. But history teaches us that pressures build invisibly , until a tipping point forces them into the open. Think back to 2008. Subprime mortgages, reckless lending, overleveraged banks , all slow-burn problems. Then Lehman collapsed, and in a matter of weeks the global financial system looked completely different. What felt manageable for years suddenly became existential. We’re seeing similar patterns today. Government debt-to-GDP ratios are at record highs. Small and mid-cap stocks in India are trading at valuat...

If you just look at the index levels, it might seem like the rally still has legs. But dig into the underlying numbers, and a different story emerges. The signals from corporate earnings, valuations, and historical return patterns all suggest caution. 1. Corporate Sales Growth Has Stalled Earnings growth comes from two levers: selling more (volume growth) or selling at higher margins. Margins in India are already near lifetime highs, but sales growth is soft. FY25 revenue growth for many sectors is well below historical averages. Pre-COVID, sectors like Construction, Capital Goods, and Power routinely saw double-digit sales growth. Now, they’re mostly in single digits. This means profit growth will struggle unless margins somehow expand further — which is unlikely at current levels. In short, the economy isn’t firing on all cylinders, and corporate India isn’t seeing the broad-based top-line growth that usually supports a bull market. 2. Valuations Are at Bull-Market Extremes...