Stock markets are hitting record highs amid energy disruptions and geopolitical tension, creating a stark disconnect with reality. The S&P 500 continues its climb despite the Strait of Hormuz closure and Brent crude hovering around $100 a barrel. This phenomenon, dubbed the 'Bliss trade,' reflects investor confidence in government support overriding market fears.

Government interventions have become structural rather than temporary. During the pandemic, advanced economies received support averaging 25% of GDP through equity injections, loans, and guarantees. Europe spent 2.5% of GDP on energy support when only 0.9% would have compensated the most vulnerable households, demonstrating broad rather than targeted fiscal responses.

The Bliss trade appears fragile as markets may be pricing government support that's increasingly unaffordable. Global public debt is projected to reach 100% of GDP by 2029, with the IMF warning the Iran conflict could push debt past 120% of GDP while reducing growth to 2%. Policymakers face the challenge of creating sustainable crisis support before markets realize the backstop is disappearing.