Investment firm Ruffer has warned that market narratives, particularly around artificial intelligence, are increasingly influencing share prices and could increase the risk of sharp market reversals.
In its Ruffer Review 2026, investment specialist Gemma Cairns-Smith argues that social media, retail trading platforms and investment strategies linked to market trends are helping popular investment themes spread more quickly and influence prices.
The AI boom is a key example. Strong investor demand has driven high valuations among a small group of large US technology companies, raising questions about whether expected returns will justify their substantial spending. Ruffer also points to the growth of speculative financing as a potential warning sign.
Retail investors are playing a greater role in market movements, supported by low-cost trading and social media discussions. Institutional investors can also follow prevailing market trends because their performance is often measured against benchmarks, making it difficult to move away from popular investments.
Passive funds and systematic trading strategies can reinforce these movements. When markets rise and volatility remains low, some strategies increase exposure. When sentiment changes and volatility increases, the same systems can trigger selling, potentially accelerating market declines.
Ruffer identifies three stages in a market narrative: an early phase when an asset may be undervalued, a period when the investment story attracts wider interest, and a final stage when prices fall as sentiment changes.
Gold mining shares provide an example of the early stage. During 2023 and 2024, gold prices rose while mining shares lagged. Ruffer increased exposure as it saw potential for mining companies to benefit from higher gold prices and improving margins. During 2025, mining shares outperformed as investor interest increased.
By contrast, Ruffer believes AI-related valuations are showing warning signs, although it does not claim the market has reached its peak. The firm argues that investors should assess company fundamentals and valuations rather than relying solely on the popularity of an investment theme.
Ruffer says it does not attempt to predict the exact peak of a market cycle. Instead, it focuses on prices, underlying fundamentals and the potential for different outcomes, with an emphasis on balancing exposure to growth opportunities against assets intended to protect capital.
Ruffer Investment Company Limited (LON:RICA) is a British investment company dedicated to investments in internationally listed or quoted equities or equity related securities
