The meltdown in Nvidia stock is an important straw in the wind for equity markets. 

The £213bn loss in value in a day is huge but it also has to be seen in the context of a 120pc rise over the last year as artificial intelligence (AI) became the most debated issue in finance.

The pull-back illustrates how over-exuberance in share markets, driven partly by a herd instinct, can greatly inflate valuations.

Over the long haul, as the Barclays equity gilt study shows over more than century, shares outperform bonds.

That has become even more the case in recent crisis-laden years because of increased volatility in the markets for government bonds, considered the safest of all havens.

The strength of equity markets should not come as a major surprise.

A combination of the financial crisis of 2008, Covid and the worsening Russian war on Ukraine led to trillions of dollars of public money being tipped into economies, taking debt levels, in most Western democracies, to 100pc of national output.

Some of the money has been directly dropped into the pockets of taxpayers.

Donald Trump and Joe Biden both sent cheques to everyone in America with a social security number.

In the UK there have been more indirect subsidies such as those provided by the Tories to meet energy bills. But the effect of fiscal laxity and quantitative easing, central banks buying bonds to create cash, created a wall of money which has found its way into equity markets.

The US, with its tech superiority and higher productivity, has been a big beneficiary, with the 'Magnificent Seven' tech companies pulling the rest of the S&P, FTSE 100 (more slowly) and other indexes along with it.

There is speculation now that the driving force of global prosperity, the US economy, is running out of steam. The trade cycle tells us there will an American slowdown. Aside from tech advances there is not much to be optimistic about.

The geopolitical situation is awful. Iran and its proxies in Yemen, Lebanon, Gaza, Sudan and elsewhere are wreaking havoc. Efforts to end the dangerous war in the heart of Europe are all but non-existent.

China's growth spurt has stalled. And trade barriers are going up, erasing the benefits of globalisation.

Leading New York bankers are battening down the hatches. Stock markets may provide the best store of value over the decades but in the short-term can destroy savings. Who can forget the 25pc setback in October of 1987, the tech meltdown of 2000 and so on?

It doesn't need an American recession to undermine values, but as the wise Keynesian JK Galbraith noted, one needs to keep an eye on the 'bezzle' - speculative behaviour which builds up ahead of a crash.

The cult of the equity is greatly diminished in the UK but the success of platforms such as Hargreaves Lansdown, AJ Bell et al has provided a pathway into shares via funds.

They have a vested interest in talking up markets. The rise of meme stocks, 'no-commission' broking sites and the other gimmicks has drawn a whole class of new investors into stock markets in the US. There is a belief that there is a duty for stocks to only rise and never fall.

Lowering interest rates could protect equity investors from heavy losses.

But the American Federal Reserve, the Bank of England and others kept borrowing costs too high for too long and small quarter-of-a-percentage cuts in rates will not be enough to prevent soft landings becoming harder.

It is only the bravest of hearts, when looking at many equity valuations, who will keep buying.

Half-full 

After dire talk of fiscal and societal black holes, Rachel Reeves finally is discovering an inner desire for growth.

She has listened to entrepreneurs and venture capitalists by extending the tax efficient Enterprise Investment Scheme and Venture Capital Trust arrangements, which have generated £41bn of investment over 30 years, for another decade.

Both offer incentives to invest through income tax breaks and exemption from capital gains.

It would be a pity if entrepreneurs, outside the tent, were to be penalised through the equalisation of capital gains and income taxes.