Written by: He Hao
Source: Wall Street News
From tech stocks to gold to cryptocurrencies, the hottest trades on Wall Street, which were previously chased by funds every day, have now turned into a sudden retreat of risk aversion.
This time, there was no single trigger, unlike last April when the market experienced a panic sell-off due to US President Trump's trade war. Instead, a series of slowly accumulating news items sounded alarm bells, triggering market anxiety about asset valuations, which many had already suspected were too high, ultimately leading investors to withdraw almost simultaneously.
Thursday's market performance further confirmed this:
The S&P 500 fell 1.2%, marking its third consecutive day of decline; the Nasdaq 100 extended its losses, experiencing its deepest pullback since April of last year.
Software stocks continued their decline as artificial intelligence company Anthropic launched a new model designed to perform financial research, highlighting the competitive threat posed by new technologies.
Silver prices, which had previously hit record highs along with gold, plummeted by 17%.
Bitcoin plunged 10% in a single day, erasing all gains since Trump won the election 15 months ago, as investors began closing out losing trades financed by borrowed money.
U.S. Treasury bonds rebounded, once again playing their traditional role as a "safe haven."
Despite better-than-expected revenue, Alphabet, Google's parent company, saw its stock price pressured downward after announcing ambitious spending plans.
Amazon shares plunged 10% after the U.S. stock market closed on Thursday, after the company said it plans to invest $200 billion this year, far exceeding analysts’ expectations, who are increasingly concerned about tech companies overspending on artificial intelligence.
Recent market movements stand in stark contrast to Wall Street's sentiment at the beginning of the year. At that time, strategists predicted that the U.S. stock market was poised for its longest winning streak in nearly two decades. These predictions were based on several assumptions: the artificial intelligence boom would continue, a resilient economy would continue to support corporate profits, and the Federal Reserve would lower interest rates.
This overall outlook largely remains intact, as evidenced by the solid earnings reports released in recent weeks. However, at the same time, the market is also refocusing on some accumulating risks:
- Which companies will be eliminated in the AI wave?
- If Kevin Warsh, Trump's nominee, is confirmed to succeed Powell as Federal Reserve Chairman, what will be the direction of monetary policy?
- And whether the valuations of assets including gold, Bitcoin, and even tech giants like Alphabet are already too high and unsustainable in the long term.
The stagnation of momentum is particularly evident in Bitcoin:
For most of last year, the speculative frenzy sparked by Trump's election victory drove cryptocurrency prices soaring, but this month, the market has experienced a collapse as investors have withdrawn large amounts of capital.
On Thursday, the sell-off intensified as the trading day progressed, dragging down other cryptocurrencies, related ETFs, and "crypto vault" companies like Strategy, which holds significant amounts of Bitcoin.
Bitcoin plunged as much as 13% late Thursday afternoon New York time, falling below $63,000, nearly halving from its all-time high four months ago.
In the stock market, the decline was relatively mild, but selling pressure was widespread, with nine of the eleven major sectors in the S&P 500 falling. Besides concerns about which companies will be losers in the AI technology wave, investors are also questioning whether the massive investments in this technology will ultimately pay off. The decline in the share price of Google's parent company, Alphabet, reflects this sentiment.
Regarding the aforementioned trend, industry insiders pointed out:
People are clearly shifting towards a more defensive strategy. It's more like a market environment where you fire the first shot and ask questions later. The fear and uncertainty throughout the market are palpable.
The recent pullback reflects market concerns that the hottest stocks and assets like gold had risen too quickly and deserved a "liquidation." This is a reset. Momentum may have been overexploited.
