Having used hooks to replace my state at some point I couldn't agree more. Application state should not be dependent on components, rather components should be dependent on application state.

My recommendation is keep hooks and contexts for ui state only, like form fields/validations, modal popups, drawer collapse, filter options, etc, but for things dealing with more general application state which the ui will display, like user information, products list, project data, application settings, etc, a separable state machine should be used. This works well because components are responsible for their own state leaving the state manager clean from individual ui component information, and ui components are free to be passed whatever data improving reusability.