Beyond the Buzz: Managing Long-Term Risk in an Age of Short-Term Euphoria
By Scott Tomenson
Markets are euphoric. The S&P flirts with record highs, Bitcoin surges on liquidity hopes, and central banks hint at rate cuts. For many investors, it feels like the worst is behind us. But beneath the surface, the risks we’re ignoring may prove more consequential than the ones we’ve just survived.
This is not a call for pessimism. It’s a call for stewardship.
After four decades in financial markets—trading currencies and bonds, managing billions in institutional risk, and later advising hundreds of families through private wealth—I’ve seen euphoria before. It’s powerful, seductive, and often short-lived. Today’s optimism is built on compelling narratives: AI-fueled productivity, resilient consumers, and a return to monetary accommodation. But these stories often obscure deeper structural vulnerabilities—ones that don’t show up in quarterly earnings or sentiment surveys.
Global debt levels have reached historic highs, with sovereign borrowing increasingly untethered from fiscal discipline. Climate liabilities remain underpriced, even as extreme weather events strain insurers and infrastructure. Shadow banking continues to grow in opacity and influence, while geopolitical risks—from the Taiwan Strait to the Arctic—are treated as background noise rather than systemic threats.
Markets, by design, are forward-looking. But they are also prone to myopia. When asset prices rise, risk premiums compress, and the discipline of valuation gives way to the momentum of belief. In such moments, the role of institutional investors, fiduciaries, and policymakers is not to chase the crowd—but to ask harder questions.
What assumptions are we baking into our models? What tail risks are we discounting? And what kind of legacy are we building—not just for our portfolios, but for the societies they serve?
Canada has long been admired for its prudence. Our pension funds are global leaders in long-horizon investing. Our regulatory frameworks, while imperfect, have historically balanced innovation with stability. In this moment, we can lead again—not by outpacing the market, but by anchoring it.
That means rethinking asset allocation in light of climate transition risk. It means supporting clearer disclosure standards for nonbank financial institutions. It means resisting the temptation to treat liquidity as a substitute for solvency—or volatility as a proxy for safety.
But it also means something deeper: modeling a civic ethic of responsibility. Markets are not moral arbiters. They reflect our choices, our incentives, and our blind spots. If we want them to serve the long term, we must act like stewards, not speculators.
Short-term euphoria is seductive. But resilience is built in the long term. For those of us entrusted with capital—whether public or private—the challenge is not just to manage risk, but to model it. To show that prudence is not passivity, and that legacy matters more than momentum.
In a world awash in noise, clarity is a public good. Let’s offer it.