Boom crash (opera)

$2.3 trillion in market value erased from the Nasdaq in a single session, the largest destruction ever. Hopes for market stabilisation following the midterms short-lived, as a renewed dip swiftly flips into a widespread rout, turning screens into a sea of red. Nikkei enters technical bear market, down 20% from its peak in June this year. Nvidia down 9% in a session, erasing the year's gains. Musk's companies hit particularly hard, following his very public siding with and backing of the Republicans, TSLA closing down 11% on the day. Rates hiked by the Bank of England for the first time in three years, plus a warning of more pain to come for mortgage holders in the UK. The RBA hikes for a fifth time this year, bringing rates to their highest level since 2008 and flagging that inflation is not likely to return to their target range for another two years. Treasury yields continue to retreat as investors turn increasingly to traditional safe havens. Metals rallying hard midweek, silver (XAGUSD) +5% in one session. Energy markets falling on hopes the Democrats now have the power to find a path out of Iran, in turn going some way to ease inflationary worries. Dollar index down to a one-month low midweek, as the Yen rallies. Cryptos sliding with risk off moves, BTCUSD now testing key technical support level.

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Blunami wipe-out

The sound of a wave crashing comes primarily from the air bubbles popping at its leading edge. Well... this week brought a so-called "blunami" wave in the US, shortly followed by what could now be fairly called the popping of a handful of bubbles in the sector at the cutting edge of tech. While the overall result of the midterms was never really in doubt, the scale of the shift was a shock. As a result, election day itself brought moves reminiscent of Trump's shock win back in 2016. In short a brief panic followed by a V-shaped recovery and indeed relief rally. The relief was short-lived however. While reporters were busy labelling Thursday the worst session since the tariff wars of April 2025, it quickly became the worst session since the Covid-related panic of March 2020. And all it really took was the "hint of a slowdown in the AI build-out narrative", according to Michael Burry. Fragile forecasts are hurriedly being reassessed, as the environment they rely upon has been greatly altered via the polling booths. Does the shift in administrative power provide a less encouraging backdrop for the extraordinarily outsized expenditures in the AI boom?

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Something I do want to point at though is the surprising resilience of a number of sectors and indices through the selloff thus far, with only a minor zooming out of the charts necessary to reveal it. For example, while the DAX no doubt had a rough session on Thursday like most indices, it only fell back to where it sat... last Wednesday. Hardly even a correction, let alone a crash. Similarly, as I write the ASX is only 250 points back from its all-time highs. While we are now certainly seeing more contagion vs what was previously more of a rotation in the weeks leading up to it, we are still not seeing the correlations that one might expect from experience through similar market episodes. The other US indices were sliding with the Nasdaq this time, but looking at the sector map, utilities and consumer staples were only down around 0.7% each. Again hardly the scale of spillover that should be drawing comparisons to 2008 and 2001, yet. It may seem silly to label a rout like last night's as contained. But in relative terms that is what it has been, so far at least. Will that comparative fortitude continue to hold? Or will another hit, if it comes, send stronger shockwaves?

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Next week

China will release their CPI and trade balance figures on Monday and Tuesday respectively. US CPI will be closely watched on Tuesday, where the headline figure is expected to be 3.7% again. PPI from the US is one to watch for too come Friday, with consensus currently at 6.1% y/y (vs 6.3% for Sep.). Odds of a hike at the December FOMC meeting are currently at 69%.

Naturally geopolitics remain very much in focus too. Perhaps most pertinent in the immediate term is the question of Trump's next move in Iran: does he react to the crushing midterm defeat in anger or in consolation? The fact that he has thrown renewed support behind his "Secretary of War" Pete Hegseth has increased concerns that military operations could escalate in the coming days. Close behind in focus is the matter of tariffs, and how far the Trump administration is forced to ease them back when faced with pressure from Congress.

Have hedge funds and so-called pod shops been forced into selling, exaggerating some of the market moves? Has Leopold done it again? We'll be keeping an eye out for confirmation of the murmurs going around today.

US earnings season winds down for Q3, but several key releases do remain. Highlights include Take-Two in the pre-market session on Monday, and Cisco and CoreWeave in the post-market on Tuesday. Go well out there.