Prof G Markets: "Something Has Broken In The U.S."

Guest: Katie Martin (Markets Columnist & Editorial Board Member, Financial Times)
Date: January 30, 2026

Episode Overview

In this episode of Prof G Markets, Scott Galloway and Ed Luce are joined by Katie Martin, markets columnist and editorial board member at the Financial Times. Together, they examine growing dysfunctions in the U.S. markets, including the fallout from political chaos, the diminishing trust of global investors, and the outsized influence of AI and big tech. The episode explores the concept of global portfolio diversification, the ripple effects of U.S. instability, and what the “Sell America” (or rather, “Rotate Out of America”) movement really means for investors globally.

Key Discussion Points and Insights

1. The State of U.S. Markets and Political Protest

• Scott's Call for Economic Strike:
  • Galloway discusses his recent idea to organize a targeted economic strike—"Unsubscribe February"—encouraging people to pause spending and cancel subscriptions to big tech/AI companies (e.g., OpenAI, Amazon, Apple) as a way to send a message to the administration and impact GDP.
  • He notes consumer action is the “most radical act of protest in a capitalist society is non-participation.”

    "The basic logic is I don't believe that...political protests are very cinematic... But I would argue...we need to be more strategic. In America, the consumers control 70% of the economy." (Scott, 04:30)

  • Emphasizes the need for a targeted and surgical approach, focusing on "the most overvalued" companies, not on hurting the broader economy or small local businesses.
• Ed agrees, highlighting the potential impact if such actions are well-aimed but questions the practicality of mass organization given consumer dependency on these services.

2. Davos "Taco" and Market Reactions

• Ed and Katie on Davos Fallout:
  • The term "taco" is used for political tantrums or chaos moments that move markets.
  • Katie notes the latest 'taco' was milder than previous ones (e.g., last year’s "Liberation Day tariffs"), suggesting market participants have become inured to Trump’s volatility, expecting him to "chicken out" on threats.

    "Investors have become so accustomed to this idea that Trump always chickens out...a lot of people in markets never took it that seriously to begin with." (Katie Martin, 12:19)

• Danger: Markets may no longer act as a "check and balance" on presidential behavior, leading to increased systemic risk.

3. U.S. Dollar, Broken Trust, and Global Rotation

• Global Investors Lose Faith:
  • Katie describes a durable loss in trust towards U.S. assets by non-U.S. investors, particularly since escalations over Greenland and other “reckless” executive actions.
  • She observes a clear split:
    • U.S.-based asset managers remain mostly bullish on U.S. markets.
    • European/Asian managers see the dollar as broken, are concerned about political risk, and are actively diversifying away.

    "Trust has broken down. And so now, particularly...since the heat really increased on Greenland, what investors are saying to me is that, look, we have to accept that we live in a world that...Maybe he's going to get into some sort of argument with my government. What's the risk premium I need to embed in my U.S. assets for these sorts of risks that didn't exist before?" (Katie Martin, 15:12)

  • The dollar’s recent decline wiped out U.S. stock gains for many foreign investors, even as U.S. headlines boasted S&P strength.

    "While the headline number, the S&P is up 17%, if you're...where the dollar declined by 10%, basically all your returns are wiped out." (Scott, 21:15)

4. Performance Everywhere Else

• Why Foreign Markets Outperform:
  • Large pension and asset managers have reallocated exposure—“rotation, not Sell America”—reducing U.S. allocation in favor of Europe, Japan, Asia.
  • This reallocation has produced huge gains in global markets: Spain up 50-70%, Korea up 70%, Japan and Canada also seeing 20–30%+ gains.

    "You can fit the whole of the FTSE 100 index just inside Apple multiple times...it's important to bear in mind just the sheer size of this thing. The entrances into European markets...are much narrower." (Katie Martin, 19:11)

  • Inflated U.S. headlines can mask the story for non-dollar-based investors.
• Durability:
  • Katie, speaking with global managers, believes this shift will endure, possibly marking “the point at which the U.S. started to lose its global centrality.” (Katie Martin, 20:11)

5. Japanese Bond Market Watch

• From Boring to Volatile:
  • Katie explains Japan’s bond market—once “aggressively boring”—now faces inflation and rate hikes, risking major disruption.

    "Japanese bond market [is] sufficiently boring that genuinely some Japanese government bond trading floors have like mini golf set up on them. Right. It's just that nothing happens...That era is over." (Katie Martin, 21:48)

  • Carry Trade at Risk:
    • If Japanese yields surge, Japanese institutions could pull back investments from global assets, destabilizing broader markets.

6. AI Bubble and Big Tech Concentration

• AI as Double-Edged Sword:
  • Scott and Ed see two outcomes:
    1. AI companies cut in value by 50–60% (froth gets blown off).
    2. Layoffs/efficiency drive via AI, causing social/economic pain.
  • Katie notes insiders themselves (Altman, Bezos) publicly admit AI is in a “bubble stage,” and warns that much capital is still blindly allocated based on AI optimism.

    "For me...there's a thick layer of just like bubbly nonsense that sits on top of this space...A lot of that froth does need to get blown off." (Katie Martin, 30:00)

  • Global markets are heavily exposed—“there’s no escaping it”—since tech giants represent enormous economic weight, both in stocks and credit markets.

7. The AI Productivity Divide

• Survey Data:
  • Ed highlights a survey showing C-suite execs think AI saves them time (45% say it saves 8+ hrs/week), but only 2% of workers agree; 40% of non-executives say AI saves them no time at all.

    "There is a gigantic divergence between workers and CEOs on the extent to which AI is actually helping the business and saving them time." (Ed Luce, 33:18)

  • Katie shares the anecdote of Norway's oil fund CEO, who "forces AI down everyone's throat," yet reported only modest (self-reported) productivity gains.

    "If this stuff is so useful, why do you need a maniac to tell you to do it at the cost of otherwise losing your job?" (Katie Martin, 35:29)

• Growing investor scrutiny:
  • The easy money (“just say AI and get a trillion-dollar valuation”) era is ending; show-me-the-money demands are rising, especially as companies like OpenAI roll out ads and pivot to monetization.

8. Europe as an Investment Opportunity

• Push and Pull Factors:
  • U.S. policy risk “pushes” money out, while real fiscal expansion, infrastructure, and bank health “pull” money into Europe and Asia.
  • Anticipation of Ukraine reconstruction is seen as a future investment driver.

    "For a lot of investors...the case for investing in Europe has, has rarely been stronger than it is today...The multipliers on that are likely to be much higher." (Katie Martin, 41:00)

• Ed raises the Q:
  • Does Europe have enough investment power to “stand up to America” and really shift global finance? Katie notes Europe wields leverage, especially as a buyer of U.S. Treasuries—a dynamic the current administration is sensitive to.

9. The Unfixable U.S. Reputation Damage

• Lasting Effects of Political Chaos:
  • Katie says trust in U.S. institutions is irrecoverably damaged, and that will overhang U.S. assets for years, outliving the current administration.

    "The trust is gone...this is going to hang over U.S. assets much longer than Trump is around. The next administration is going to have to spend a fearsomely long time rebuilding that trust." (Katie Martin, 56:14)

  • Her one-word summary: Diversification.

    "Something has broken with the U.S...you can't put the ship back in the donkey, right? You can't unsay that you're thinking of invading Greenland..." (Katie Martin, 55:31 & 56:06)

Notable Quotes & Memorable Moments

• Scott Galloway, on consumer power:

  "The most radical act of protest in a capitalist society is non participation." (04:50)

• Ed Luce, on the fine line of activism:

  “You don't want to try to hurt the Trump administration by hurting the real economy, by hurting regular American businesses.” (08:06)

• Katie Martin, on political risk and trust:

  "Trust has broken down." (15:12)

• Katie Martin, on the U.S. market rotation:

  "This is a durable shift in how global asset allocation works and we will be looking back on this moment in 10 years...that was the point at which the U.S. started to lose its global centrality." (20:11)

• Scott Galloway, on big tech fragility:

  “These companies are so fragile in the sense that if anything looks like their growth, their subscriber growth is coming down...they're going to put off buying an iPhone for two months.” (09:43)

• Katie Martin, on the perils of AI optimism:

  "...the people inside the room are saying there is a heap of stupid stuff going on here. There's a lot of Hopium, there's a lot of, you know, imagining that some sort of computer God is being created and it's all-powerful and, and crucially that it's monetizable.” (30:00)

• Katie Martin on lasting U.S. brand damage:

  “You can't unsay that the chair of the Federal Reserve is a numbskull. The stuff that it's out there, you've said it now. The trust is gone.” (56:14)

Important Timestamps

• 03:20 – Scott details his idea for a national economic strike (“Unsubscribe February”)
• 08:06 – Ed questions the strike’s efficacy and implications for the real economy
• 11:34 – Start of interview with Katie Martin
• 13:48 – The “head fake” for investors: “Ignore the noise, but also take some radical action”
• 15:12 – Breakdown of trust in U.S. assets and implications abroad
• 19:11 – Explanation of global asset allocation and performance in European markets
• 21:48 – Why the Japanese bond market suddenly matters
• 28:14 – Scott and Ed’s AI bubble/valuation thesis with Katie’s response
• 33:18 – Ed details the disconnect between C-suite and employee experiences with AI
• 35:29 – Katie shares Norway Oil Fund anecdote about forced AI adoption
• 41:00 – Katie on the case for Europe, infrastructure spend, and multipliers
• 45:16 – Europe’s “leverage” as U.S. Treasury buyer; can Europe “stand up to America”?
• 54:02 – Uncertainty at the Fed and political meddling as an underappreciated risk
• 55:31 – Katie’s one-word investment summary: “Diversification”
• 56:14 – “You can’t unsay that the chair of the Federal Reserve is a numbskull.... this is going to hang over US assets much longer than Trump is around.”

Tone and Style

• Candid, irreverent, deeply informed.
  The hosts and guest blend high-level financial analysis with snappy, sometimes crude humor ("can't put the ship back in the donkey"). Katie Martin, in particular, is lauded for her clarity and measured understanding.

Conclusion

The episode argues that recent political events have caused an irrevocable shift in the global perception of U.S. reliability as an investment destination, catalyzing a sustained rotation into other global markets. Both Katie Martin and the hosts advise investors to re-examine their allocation strategies, with diversification being the central takeaway.

Bottom line:
If you haven’t rebalanced your portfolio away from the U.S., you may be missing a durable new trend—because, as Katie puts it, “the trust is gone, and there’s kind of no way back.”