When dragons break ceilings and giants stumble: Capital’s next great migration

The irony of 2025 is that the market everyone wants to watch isn’t the one that matters most. Wall Street is still the global amphitheater, but the real show has been running in Shanghai. Chinese equities are pressing up against decade-long resistance like a tide that refuses to recede, and their own “AI champion”—the local Nvidia proxy—has been ripping higher while the U.S. original is catching its breath. It’s the kind of divergence that makes old-hands on the desk lean back and say: when retail momentum meets policy patience, upside becomes less about valuation and more about narrative ignition. Beijing hasn’t even stepped on the gas yet—if it does, the “wealth effect” could turn from a trickle into a flood.

Flows last week only reinforce the sense that we’re shifting tectonic plates rather than just waves lapping the shore. $19.7bn poured into bonds, $16.6bn into equities, and $6.8bn into cash. Crypto and gold even caught scraps. But buried inside those broad strokes sits a more telling line item: $3.9bn into China stocks—the biggest since April—while Europe quietly bled. That’s not random; that’s capital hunting the path of least resistance.

Hartnett’s (Bank of America Corp.'s Michael Hartnett) “lucky numbers” read like a tarot deck for markets, each one whispering a cautionary tale. The sheer churn of politics—26 of 32 incumbents ousted last year, 6 of 11 this year—reminds us that populism isn’t a passing squall, it’s the climate. Germany’s mainstream parties barely scraped 49% in February, their weakest showing since 1945. The UK is at its lowest since 1918, and France since 1945. The hollowing-out of the center is more than a sociological footnote; it’s the scaffolding for policy instability. Fiscal rules bend, trade deals fray, industrial policies mutate. Capital doesn’t like that drift—it looks for systems with cohesion, even if that means turning east.

On the macro dashboard, inequality is flashing red: Wall Street asset values are running 6.1x Main Street GDP, just shy of the 2021 peak. Debt has ballooned to $37tn, eclipsing the combined economies of China, Japan, Germany, and India. Fiscal sobriety? The Italians last ran a surplus in 1905. The U.S. hasn’t seen one since 2001. Meanwhile, Treasury returns are at record humiliation levels—negative rolling 10-year returns—echoing prior market inflection points in 2009 equities or 2018 commodities. Those who can stomach the embarrassment of buying “the hated asset” might be looking at the entry point of a cycle.

Valuations in the U.S. remain stretched to the rafters. The S&P trades at a 5.3x price-to-book multiple, a level unseen since the 1940s. Trailing P/Es north of 27 have only been tagged in 2% of history. And concentration is once again humming the same dangerous tune: railroads at 63% of market cap in 1881, Nifty Fifty at 40% in ’72, Japan at 45% of world cap in ’89, tech at 40% in 2000. Today the “AI Big 10” sit at 39%. Every bubble has its chorus of “this time it’s different,” but the melody doesn’t change.

Then there’s the under-priced elephant: energy and data. AI is projected to double global data-center power demand by 2030, equivalent to Japan’s entire electricity consumption. U.S. power bills already rose 6.3% over the past year. That isn’t just a margin squeeze, it’s the quiet scaffolding of inflation persistence that keeps central banks awake at night. And while China’s consumption-to-GDP ratio lingers at 40% (versus 68% in the U.S.), the vector is up. A real rebalancing there doesn’t just move indexes; it alters the current account architecture of the world.

Put it all together and you have a world where:

• China offers the breakout story nobody on CNBC wants to hype just yet.

• The U.S. is a stretched rubber band—massive debt, high valuations, policy on steroids, and a dollar edging into bear-market risk territory (-11% from peak, with 33% the historical trough).

• Flows are moving not on nostalgia but on necessity: into the places where returns can still be justified.

It feels like we’re in the middle innings of a regime shift. The past decade rewarded passive U.S. equity beta, but the next one might belong to the unloved, the under-owned, and the politically inconvenient—China stocks, commodities, battered bonds. Markets always have a way of humiliating the maximum number of players at once, and right now the setup suggests that humiliation belongs to anyone who believes the old U.S. exceptionalism trade is still the only game in town.