This is a segment from The Breakdown newsletter. To read more editions, subscribe. “It infuriates me to be wrong when I know I’m right.” — Molière US equities returned to their all-time highs this week despite all the worrying politics: tariffs, Fed-bashing, the BLS drama. Or are markets up because of politics? A new research paper finds that a high level of political disagreement is predictive of positive returns for stocks. The authors used a large language model to create 216 “virtual investors” with differing political and social views, asked them how they’d react to years of stock market news, and found that the stocks sparking the most disagreement delivered better returns. This explains a lot: Disagreeing about politics is at an all-time high, so maybe it makes sense that stocks are, too? If so, there should be many more gains to come. Another academic study found that “many partisans interpret factual questions about economic conditions as opinion questions,” and that they answer such questions accordingly. This also explains some things: Economists despair that people’s views of the economy are increasingly just a function of their politics. As it turns out, that’s because they think questions about the economy are about politics. When the researchers offered a monetary incentive to answer the questions factually, the responses got much more accurate. Perhaps that’s what happens in markets, as well: Prices fall on the initial wave of disagreement, then rebound as the drop incentivizes people to revisit the facts. But this isn’t a case of clear-eyed professionals taking advantage of biased retail investors — another study finds that even the pros are misled by their politics. “Republican-affiliated forecasters project 0.3-0.4 percentage points higher growth when Republicans hold the presidency, relative to Democratic-affiliated forecasters,” the researchers found. “Forecast accuracy shows a similar partisan pattern: Republican-affiliated forecasters are less accurate under Republican presidents, indicating that partisan optimism impairs predictive performance.” I’m sure it works in the other direction, too, so there should be plenty of opportunity for unbiased investors…no matter who’s in the White House. Could rising partisanship usher in a golden age for investors then? When even the mundane Bureau of Labor Statistics is a point of political disagreement, investors may have a lot to look forward to. Let’s see if we can help out by disagreeing over some charts. Sales up, profits down: Meta said last week it’s making a high return on its giant AI investments because it makes its ads more effective. The rest of corporate America doesn’t seem to be benefiting just yet. If you’re not paying for the product, the product is you: Meta is so good at targeting ads, it makes $25 of revenue off of each and every one of its users, each and every month. The not-so-magnificent 493: The Mag 7 continues to grow earnings at a double-digit pace, but the rest of the S&P is expected to grow at 3% or less over the last three quarters of the year — less than the rate of inflation. The US stock market is narrow and expensive: Nvidia now makes up almost 8% of the S&P 500 and trades on 58x P/E. In 1994, the largest stock was GE, which was only 3% of the S&P 500 and traded on just 8x P/E. Fewer college kids: The Association of International Educators estimates that new international enrollment to American universities will be down as much as 40% in the upcoming semester. Fewer immigrants, fewer jobs: Claudia Sahm says “reduced labor supply is likely the key driver” of the weak jobs growth reported last week. That is bad news, but maybe less bad than if weak demand was more to blame. Kids today, ugh. The FT’s John Burn-Murdoch runs the numbers on Gen Z and millennials and….one sec. Sorry, I thought I had a notification on my phone. Anyway, kids today, right? The good news for young job seekers is that it won’t be hard to look good by comparison. Looking good by comparison: In the US, we’re worried that interest on the national debt is now eating up a record high 18% of government revenue. In China, though, one-third of provinces spend over 100% of revenue on debt repayments. I feel better now — it’s always nice to have a friend doing worse than you are. ChatGPT usage is booming: And GPT-5 is even better — an excellent but incremental and non-threatening evolution of the LLM. Is that enough to justify the $500 billion valuation that OpenAI has reportedly assigned itself? That would put it on a rich but not ridiculous valuation multiple of about 25x this year’s sales. It’s not very good at charts, though: This misproportioned chart crime was included in this week’s GPT-5 livestream. I take that as evidence AGI is further away than Sam Altman would have us think. Google is pulling back ahead: