When the Story Becomes the Asset
There was a time when investing was measured in discounted cash flows, margin analysis, and disciplined entry points. That era isn’t gone, but it’s no longer steering investor sentiment, particularly in the heavily momentum-driven environment of summer, 2025. In its place stands a new market engine: narrative.
The talented team at Goehring & Rozencwajg (Gorozen) describe things thusly in a recent newsletter appropriately titled The Next Inflation Surge is About to Begin*:
Investors, ever eager to believe in happy endings, have largely declared the inflation scare of 2021 a closed chapter. The narrative now making the rounds is one of restored order—of price stability returning like an old friend, ready to stay a while. The exuberant rebound in long-duration assets, especially the ever-popular large-cap growth stocks, has only added fuel to this comforting belief. If the markets are a mood ring, they are glowing with complacency.
*Note: We’ll be running excerpts from that newsletter in next week’s Friday Haymaker.
For decades, fundamentals were the investor’s compass. You built the financial model, slapped on a P/E multiple, and hoped the market would eventually agree with your thesis. It was a methodical, if imperfect, process. But in today’s market, valuation is no longer the north star, it’s the safety net and the ceiling now belongs to belief. Unfortunately, though, for a multitude of securities, that safety net is a long way down from current prices.
The transition didn’t happen all at once. Somewhere between trillions of excess liquidity in the post-Covid era and an utter conviction that “number go up”, something cracked and fundamentals took a backseat. Flows into markets took the wheel and the collective imagination of investors, dazzled by memes, AI plays and cryptos, became the dominant driver of price. When considering the early days of modern industry, we tend to think (maybe inaccurately) of the product giving rise to the story; now, it’s (often) the story giving rise to the stock price and a product coming along at some indeterminate time thereafter. Or, in the case of most cryptocurrencies, never.