Markets Are No Longer Allocating Capital
Financial markets are still widely understood as mechanisms for allocating capital to productive activity. That assumption is becoming less accurate.
The majority of activity today takes place in secondary markets, where existing assets are traded rather than new capital being raised. At the same time, algorithmic trading systems increasingly dominate price formation, reacting to signals at speeds beyond human perception.
This shifts the function of markets. Instead of primarily funding economic activity, they increasingly operate as systems processing information, expectations and short-term signals.
In this environment, price movements reflect not only fundamentals, but the internal dynamics of the system itself.
Markets are no longer just allocating capital — they are becoming computational environments.
Photo by Allison Saeng / Unsplash
