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JPMorgan Chase's profit exceeded analysts' estimates in the ‌fourth quarter on Tuesday as its traders cashed in on volatile markets.Markets swung sharply in the last ‌three months of 2025 as concerns about a ‍bubble in AI stocks intensified after two years of broad gains. CEO warnings that equities were due for a correction also encouraged investors to rebalance their portfolios."The US ⁠economy has remained resilient," CEO Jamie Dimon said in ⁠a statement. "While labour markets have softened, conditions do not appear to be worsening. Meanwhile, consumers continue to spend, and businesses generally remain ‍healthy."Markets revenue at JPMorgan climbed 17% in the fourth quarter, as equity surged 40%, driven by higher revenue across products, particularly in Prime. Fixed income climbed 7%.The prime brokerage business on Wall Street has benefited from surging valuations of companies across sectors.Bond markets also remained jittery as uncertainty persisted around when and how much the US Federal Reserve would cut rates.Meanwhile, average loans climbed 9% in the quarter.The bank's shares were last up 0.5% in volatile premarket trading following the results. The stock surged 34.4% in 2025, outperforming the broader equity markets."I wouldn't expect a whole lot out of JPM stock ‌today, as the stock is coming off a great year where the bar for perfection is set pretty high," said David Wagner, head of equities and portfolio manager at Aptus Capital Advisors, which holds shares of the bank."Today's strong results reflect that the bar can be met, ‍but a lot is currently priced into the ⁠stock."The largest US bank earned $5.23 ‌per share in the quarter ended December 31, on an adjusted basis, beating Wall Street expectations of $5, according to estimates compiled by LSEG.JPMorgan recorded a $2.2bn provision in the reported quarter tied to its agreement with Goldman Sachs to take over a credit card partnership with Apple.JPMorgan's investment banking fees fell 5% in the quarter, easing from a bumper prior year when a surge in deal activity helped lift the bank to its highest-ever annual profit.Bankers are optimistic that a pickup in dealmaking will continue through 2026, driven by record-high equity markets and expectations of interest rate cuts."Investment banking was a bit disappointing but expect forward commentary to be more constructive, while average loan growth accelerating bodes well for the lending side," said Stephen Biggar, an analyst at Argus Research.The US IPO market reached its highest level in 2025 since the 2021 peak, in terms of both deal volume and funds raised.JPMorgan worked on several ​high-profile transactions during the quarter, including advising Warner Bros ‌Discovery on the $82.7bn deal for its studio and streaming assets with Netflix and Kimberly-Clark on its $48.7bn acquisition of Kenvue.It was also a lead underwriter on medical supplies giant Medline's ⁠IPO, the largest listing globally in 2025.JPMorgan extended its ‍run as the world's top investment bank, earning the highest fees for the year, according to data from Dealogic.Net interest income - the difference between what a bank earns as payments on loans and gives out on deposits - rose 7% in the fourth quarter to $25.1bn.While lower rates can dent interest income, they can also encourage borrowing. The bank expects 2026 interest income, excluding markets, of about $95bn.Large lenders, including JPMorgan Chase and Bank of America , provide a gauge of the US economy, shedding light ​on consumer spending, borrowing and business activity.Rivals are set to report results later this week, giving investors a broader view into the health of the economy.The bank's deal with Goldman to issue Apple's card is expected to strengthen JPMorgan's foothold in credit cards and add to a long list of strategic wins for Dimon, who has turned the bank into a leading player across retail and investment banking.The deal comes at a critical juncture for the credit card industry, which could face a sharp shift if a proposal by US President Donald Trump to cap interest rates at 10% moves forward. While Trump has said he expects companies to comply by January 20, Wall Street analysts remain doubtful the measure can be implemented without congressional approval.A banking ⁠industry body warned last week that the move could tighten access to credit for consumers and small businesses and drive borrowers toward unregulated lenders.

At the turn of the year, the outlook for investors is unusually difficult to call. Signs of a possible investment bubble in AI-related stocks have prompted some falls in technology stocks, but often followed by a rally. Valuations are stretched, and investment in data centres by the hyper-scalers is ambitious, but while individual institutions building AI capability may falter, many investors are looking at a broader picture in which AI may improve or even transform business performance across the economy.BlackRock, the world’s largest asset manager, declared itself continuing to be ‘pro-risk’ in its Outlook for 2026. It remains bullish regarding US tech stocks, but selectively so, stating that it is a good time for active investing, ‘for those with insights on who will capture the revenues’. The ‘micro’ has become macro – the scale of the investments in building AI capability by a small number of large tech firms is such that it has a macroeconomic impact.The projected investment in AI is projected to be as high as $8tn by 2030, while the increase to revenues for the AI hyper-scalers is estimated to be around $1.6tn per year. This, however, is not the full story. One reason that high AI-related valuations do not obviously constitute an investment bubble is that the technology has applications across the economy. BlackRock compares the AI revolution to earlier industrial revolutions such as the steam engine and mains electricity, increasing productivity and spurring economic development.Taking on debt to front-load the investment is necessary to realise the returns over a longer period, but this does come with risk to the financial system, at a time of high public sector debt. ‘Bond yield spikes could pose a risk to this financing,’ the report states. A structurally higher cost of capital raises the cost of AI-related investment.A small number of stocks with potentially high but uncertain prospects mean that divesting or staying is a big active call: There are no easy passive diversification options.The report notes that the long-term trend growth rate in GDP for the US has been around 2% per year for the past century. If the AI revolution significantly increases this, it would be historic. Such an outcome is a ‘tall order’, but is feasible, BlackRock concludes. The likely uneven impact on AI, with some businesses realising the gains more than others, calls for active investing and a rethink of traditional approaches to portfolio construction.If the AI spending fails to lift the trend growth rate above 2%, then it could crowd out non-AI investment, and potentially cause inflation to rise.A major constraint in the US is energy capacity. AI data centres could be consuming up to a fifth of electricity generated in the US by 2030. On energy, China may be winning the competition as it is proving to be able to build scale affordably in different energy sources, including hydropower, solar and nuclear as well as coal. DeepSeek, the highly competitive Chinese large language model, is more efficient on energy use than US rivals.The Franklin Templeton Institute, in its Global Investment Outlook, describes the ‘Age of Intelligence’ as a major theme. The AI revolution is just beginning, the report advises, and the potential for economy-wide efficiency gains is ‘enormous’.Franklin Templeton identifies three themes, which are interlinked: Broadening, steepening and weakening.Broadening: US equities have outperformed others for many years, and while prospects remain strong, there are opportunities emerging more broadly both within the US, and internationally. The profits of small cap US businesses are set to rise, owing to reduced interest rates and lower debt servicing costs. Assets in emerging markets show potential for attractive returns. Steepening: The combination of falling interest rates while inflation is above target will result in steeper yield curves. The Federal Reserve is likely to continue cutting interest rates in 2026, while two other factors are set to cause the yield curve to rise: Increased demand for capital to fund investment, especially in AI and energy capacity; and continued increases in borrowing by governments in the largest economies. Weakening: The US dollar weakened by around 10% in 2025, and is set to weaken further. Inflation and interest rates are lower in Europe there will be a lower cost of currency hedging. Commodity prices will likely rise, with the exception of oil. The weakening dynamic further encourages the broadening effect by enhancing potential returns in non-US assets. In emerging markets, import costs and inflation will fall allowing central banks to ease policy, underpinning bond prices. Credit ratings in emerging markets have improved.Franklin Templeton also pointed to the rise in government intervention: In trade, through tariffs and other barriers, and subsidising or otherwise protecting certain businesses or sectors. While there are legitimate reasons for some policies that curb globalisation, such as security, in general markets are better than governments at allocating capital, the report states.It is notable that neither report makes a definitive call of a bubble in AI stocks, although they do identify risks in the scale of investment, as well as systemic financial risks around leverage and high government borrowings.While there is a rational basis for being bullish, perhaps ‘carefully bullish’ might be an apt phrase.The author is a Qatari banker, with many years of experience in the banking sector in senior positions. 

US stocks have kicked off 2026 on a strong note, but could face turbulence in ‌the coming days with the start of corporate earnings season, fresh inflation data and rising geopolitical ‌uncertainty.The S&P 500 is up ‍1% in January, on the heels of the benchmark index in 2025 closing out its third straight year of double-digit percentage gains. The ⁠market's recent strength has defied an increasingly volatile geopolitical ⁠landscape. After a U.S. military operation that seized Venezuela's leader, officials in President Donald Trump's administration spoke of ‍acquiring Greenland, including potential use of the military. Investors point to a strong outlook for corporate profits, easing monetary policy and coming fiscal stimulus as supports for a bull market that is in its fourth year."On balance for this year, the foundation for the market is solid," said Michael Arone, chief investment strategist at State Street Investment Management."As we're starting January, the market may be underappreciating some of the events on the horizon that could likely produce higher volatility," Arone said. "It just seems a little ‌too quiet." While geopolitical events have boosted the safe-haven appeal of gold, stocks have largely shrugged off the uncertainty, said Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investments. The Cboe Volatility index has edged higher to start 2026 but ‍was not far above its low ⁠point from 2025."The market's ‌a bit numb to it," Miskin said. "But this is a time where everything is priced near perfection and it's a time where you can take out some insurance or think about some defensive options just in case another geopolitical event hits the headlines."Major banks kick off fourth-quarter earnings season in the coming week, with strong profit growth this year a crucial source of optimism for stock investors. Analysts expect that overall earnings from S&P 500 companies climbed 13% in 2025, and they estimate a further rise of over 15% in 2026, according to LSEG IBES.JPMorgan Chase, the largest US lender, reports on Tuesday, with Citigroup, Bank of America and Goldman Sachs among those reporting later in the week. Financial sector earnings are expected to have ​climbed 6.7% in the fourth quarter from ‌the year-earlier period.Jack Janasiewicz, portfolio manager at Natixis Investment Managers, will be looking to bank results for insight into the health of the consumer, such ⁠as on credit card payment defaults, with ‍consumer spending accounting for more than two-thirds of economic activity."The banks are going to be telling you something that is going to be pretty important because they're on the front lines," Janasiewicz said.Investors have been struggling to get a full picture of the economy because the 43-day government shutdown late last year delayed or cancelled key reports, with data flow now returning to normal. That could raise the stakes for Tuesday's release of December's consumer ​price index, closely followed for inflation trends. It will be one of the last key releases before the Federal Reserve's next monetary policy meeting at the end of January.The US central bank lowered interest rates in each of its last three meetings of 2025 in response to a weakening labour market, but investors are unsure when it might cut further.Fed easing is adding "a sense of calm to risk markets," said Nanette Abuhoff Jacobson, global investment strategist at Hartford Funds."All the inflation numbers are going to be critical to what Fed policy is going to look like," Abuhoff Jacobson said. "If the mosaic is suggesting that ⁠inflation is inching higher, then there are going to be questions about whether the Fed is going to ease in 2026 or how much they can ease." 

Asian stocks rose Monday on the back of a fresh rally in tech firms and oil dipped as investors weighed the impact of the US ouster of Venezuelan leader Nicolas Maduro.While the South American leader's removal added to geopolitical risk on global markets, traders chose to focus on the long-running artificial intelligence boom and hopes for more US interest rate cuts.In Tokyo, the Nikkei 225 closed up 3.0% to 51,832.80 points; Hong Kong - Hang Seng Index ended up 0.1% to 26,366.90 points and Shanghai - Composite closed up 1.4% to 4,023.42 points Monday.The first full week of business for 2026 will also see the release of key jobs data that could play a role in the Federal Reserve's decision-making on borrowing costs.Investors will also be on the lookout for an idea about who US President Donald Trump chooses to take the helm at the central bank when Jerome Powell steps down in May.Asian stocks were up across the board, led by markets with a heavy tech presence.Tokyo surged three percent thanks to tech investor SoftBank's 4.9% gains and chip equipment maker Tokyo Electron's 7.6% advance.The Kospi in Seoul gained more than 3%, with SK hynix up nearly three percent and Samsung Electronics soaring 7.5%.Taipei jumped 2.6% to a record high, led by chip titan TSMC rocketing more than five percent.Hong Kong, Shanghai, Sydney, Singapore, Bangkok, Jakarta, Wellington and Manila were also well up.The gains suggest investors were brushing off worries that valuations in the tech sector have become stretched and warnings about the timing and size of returns on huge AI investments."This move now stands as the strongest start to a year for Asian equities since 2012, coming on the heels of a global market that just delivered its best annual return since 2017," wrote Stephen Innes at SPI Asset Management.Still, Kyle Rodda at Capital.com warned: "Valuations remain around levels exceeded only by the Dot.com bubble, while allocation to equities are at elevated levels at the same time allocation to cash is on the low side."Most simply put, the markets probably need to see more evidence of resilient US growth, continued disinflation and therefore US rate cuts, strong corporate earnings, and the pay-offs from artificial intelligence to keep on rising."Safe-haven investment gold was up more than one percent at about $4,400 per ounce.Oil edged down as investors assess the outlook after US forces attacked Venezuela early Saturday, bombing military targets and spiriting away Maduro and his wife to face federal charges in New York.Venezuela has the world's largest proven oil reserves, and more Venezuelan crude in the market could exacerbate oversupply concerns and add to recent pressure on prices.Trump said the United States will now "run" Venezuela and send US companies to fix its dilapidated oil infrastructure.But analysts say that alongside other major questions about the South American country's future, substantially lifting its oil production will not be easy, quick or cheap.After years of under-investment and sanctions, Venezuela pumps around 1mn barrels per day, down from around 3.5mn in 1999."Any recovery in production would require substantial investment given the crumbling infrastructure resulting from years of mismanagement and underinvestment," UBS analyst Giovanni Staunovo told AFP. 

US stocks wavered near a record high in thin holiday trading as investors shifted attention to a relentless rally in commodities. Nvidia Corp climbed as analysts viewed a licensing deal with artificial intelligence startup Groq positively.The S&P 500 finished little changed and the Nasdaq 100 fell 0.1%. Among S&P 500 sectors, materials and tech led gains, while consumer discretionary and energy retreated.Optimism remains anchored to seasonal patterns. Equity bulls are increasingly focused on a so-called Santa Claus Rally — the stretch covering the final trading sessions of the year and the first two of January — as a potential catalyst for further gains, even as enthusiasm around AI and the Federal Reserve’s interest-rate outlook comes under greater scrutiny.“Markets remain constructive but selective with the final four sessions to go,” Piper Sandler Chief Market Technician Craig Johnson wrote in a note. “The combination of improving breadth and easing inflation supports the call for a Santa Claus rally into year-end.”Precious metals surged to fresh records, extending a powerful year-end rally fuelled by rising geopolitical tensions and a softer US dollar. Gold, silver and platinum all climbed to all-time highs, lifting shares of miners including Coeur Mining Inc and Freeport-McMoRan Inc Spot gold rose 1.1%; earlier, the yellow metal peaked above $4,530 an ounce.Oil advanced toward the biggest weekly gain since October as traders weighed supply risks. Markets tracked reports of a partial US blockade of crude shipments from Venezuela, alongside a military strike by Washington targeting a terrorist group in Nigeria.The S&P 500 was up nearly 18% year to date through December 24, marking a third straight year of double-digit gains. Wall Street strategists largely expect the advance to continue, with the average forecast for the index standing at 7,464 by the end of next year, implying upside of about 7.7%, Bloomberg data show.Confidence has also been returning around the outlook for corporate profits, particularly after earlier worries that valuations in technology stocks had raced too far ahead amid the AI boom. Investors are increasingly betting that companies will deliver the earnings growth needed to justify prices in 2026.“2026 is likely going to be a prove-it year for markets,” wrote Brian Jacobsen, chief economic strategist at Annex Wealth Management. “Companies must deliver tangible productivity and margin gains from artificial intelligence and other investments.”In other corporate news, shares of Target Corp gained as much as 6.7% after the Financial Times reported that Toms Capital Investment Management has made a significant investment in the retailer. Warner Bros. Discovery shares slid after a report from the New York Post that Paramount Skydance could walk away from its $30-per-share cash bid and instead litigate against the company’s board for how it handled the process. And shares of Coupang Inc. rose 6.4% after Yonhap News reported the retailer had identified a former employee accused of accessing personal data belonging to about 33mn customers and recovered the devices involved. Biohaven Ltd fluctuated between gains and losses after a mid-stage trial of its experimental depression treatment, BHV-7000, failed to meet its primary endpoint.Elsewhere, severe winter weather disrupted travel across the US Northeast. Hundreds of flights were cancelled at New York’s major airports as a powerful storm moved through the region. The National Weather Service forecast that New York City could receive between 5 and 9 inches (13-23 centimetres) of snow from Friday afternoon through early Saturday. 

Alongside all the triumphant AI talk, surging retail spirits and whiplash trades in crypto, a quieter trend was unfolding across global markets in 2025: Diversified strategies posted some of their strongest returns in years.It’s an achievement that has largely flown under the radar.Simple portfolios split between stocks and bonds delivered double-digit advances, the best year since 2019. Multi-asset “quant cocktails” — blending commodities, bonds and global equities — outperformed the S&P 500. A Cambria Investments exchange-traded fund holding 29 ETFs spanning across global markets posted its best year on record, bolstered by hefty gains overseas.This week’s inflation report was a lesson in their wisdom. Softer-than-expected US inflation data on Thursday sparked a rare in-tandem rally in both stocks and bonds. So-called risk parity funds posted gains on the week, a reminder that market conditions still reward balance, even in a world where artificial intelligence continues to obsess investors.But while 2025 may have marked a comeback for old-school Wall Street prudence, it will also go down as another year when investors kept walking away from those very strategies. Capital has continued to migrate toward concentrated Big Tech exposure, thematic trades from nuclear power to quant computing, and blunt hedges such as gold.“Despite all the focus on the AI story, 2025 was not a stocks story,” said Marko Papic, chief strategist at BCA Research. “It was all about global diversification.”As market valuations stretch and concentration deepens — particularly in tech-heavy US benchmarks — some strategists warn that abandoning diversification now could leave portfolios exposed at precisely the wrong moment.Retail investors, in particular, have been backing away from balanced and multi-asset funds for years. The category — including public risk parity funds and 60/40 portfolios, which traditionally allocate 60% to equities and 40% to bonds — has posted outflows for 13 straight quarters, before a modest rebound this autumn, according to JPMorgan Chase & Co. While money has continued to flow into dedicated bond and equity funds, the middle — traditional blended strategies — remains out of favour.Nikolaos Panigirtzoglou, a strategist at JPMorgan, points to a multi-year stretch of underwhelming performance, compounded by unusual cross-asset correlations that dulled returns. The 2022 bond market rout — triggered by aggressive central bank tightening — further damaged confidence in fixed income as a buffer within cross-asset portfolios.“That just destroyed the psyche of retail investors about the bond market,” said Jim Bianco of Bianco Research. “And that’s the big thing — that’s why investors keep jumping around from asset to asset.”April offered a fresh scare. When President Donald Trump announced new trade tariffs during a televised “Liberation Day,” markets sank. The S&P 500 fell 9% in a week; a benchmark 60/40 portfolio dropped more than 5%. Treasury bonds rallied while gold fell. Bitcoin dropped sharply, then snapped back.Yet under the surface, a broadening has been underway for most of the year. Value-oriented equity ETFs, many of which eschew the top-heavy tech complex, pulled in more than $56bn this year, the second-largest annual inflow since at least 2000. Cambria’s Global Value ETF jumped roughly 50%, its best since launch. International stocks rebounded on fiscal reform tailwinds and a weaker dollar. Small caps outperformed in the fourth quarter.Some strategists believe the shift will extend into 2026. Greg Calnon, global co-head of public investing at Goldman Sachs Asset Management, expects US earnings growth to broaden, with small caps and international stocks outperforming. He sees continued strength in municipal bonds, supported by attractive tax-adjusted yields relative to Treasuries and robust investor demand.JPMorgan Asset Management’s David Lebovitz is tilting toward emerging-market debt and UK gilts while maintaining selective US and AI equity exposure.Still, others see signs of froth. Bank of America Corp notes that 2025 showed the second-strongest dip-buying impulse in nearly a century. Emily Roland, co-chief investment strategist at Manulife John Hancock Investments, said markets have become increasingly disconnected from fundamentals.“This year has been a short-term investor’s dream,” she said. “We would be careful with the dash for trash as of late. It has been a momentum-driven year where fundamentals and earnings growth have been seemingly irrelevant.”Yet even as investors abandon classic 60/40 bets, many have not given up on multi-asset approaches. Capital has flowed into alternative assets — from private credit and infrastructure to hedge funds and digital assets — as investors seek exposure beyond public markets. In some cases, the search has become less about portfolio balance and more about access to alternative assets, yield or insulation from public-market volatility.“They aren’t losing faith, but the 60/40 is evolving, and it’s important to recognise that what has worked for the past 25 years may not work as well over the next 25 years,” said JPMorgan’s Lebovitz. “The core concept of diversification still holds, but investors today have many more levers that they can pull.” 

The Indian rupee’s slide to repeated record lows is starting to pinch the equity market, with analysts warning that prolonged weakness could undermine confidence in the nascent recovery of the $5.2tn stock market.Asia’s worst-performing currency this year has become a near-term risk for Indian stocks, tempering optimism driven by strong economic growth and improving corporate earnings. In December, global funds pulled about $1.6bn from local equities, wiping out $1.3bn of inflows from the previous two months. Withdrawals from local debt have accelerated as well.With India heavily reliant on overseas capital to fund its current-account gap and corporate expansion, sustained outflows threaten to keep equities under pressure. Slowing earnings growth, elevated valuations and a lack of listed artificial intelligence-related names have already led to local shares trailing most emerging-market peers this year.There’s “growing pressure on the currency amid a combination of global uncertainty and India-specific capital flow challenges,” said Akshat Garg, head of research at Choice Wealth.**media[394252]**The steepest US tariffs in Asia have weighed on sentiment as traders await the two nations to finalise negotiations. The benchmark NSE Nifty 50 Index slid 0.6% on Tuesday, and now trades about 1.4% off its November peak.The currency fell past the 91 per dollar mark on Tuesday, a new record low. The Reserve Bank of India may not strongly resist further weakness in the current environment, prioritising growth over currency defence, according to Barclays Plc.To be sure, a weaker rupee can benefit companies that earn a large share of revenue overseas, particularly technology exporters. A gauge of information-technology stocks has climbed about 14% since the end of September, coinciding with the period in which rupee losses deepened.For now, traders are bracing for more volatility as the rupee’s slide compounds concerns over trade, earnings and capital flows. Until the currency stabilises or global conditions turn more supportive, India’s long-awaited equity rebound may continue to struggle for traction.Equities face muted returns as weaker rupee, range-bound government bond yields, and modest earnings growth “favour selective sectoral exposure”, Dhananjay Sinha, head of research at Systematix Shares and Stocks Ltd wrote in a note.Amid rupee weakness and withdrawals by global funds, robust flows from local institutions have limited downside in the market. Net purchases by mutual funds and insurers crossed $80bn this year, compared with about $18bn of foreign fund outflows.“Support from retail flows has cushioned volatility but hasn’t resolved the underlying uncertainties,” Chanchal Agarwal, chief investment and strategy officer at Credence Family Office, said in an interview. 

A year-end rally in US stocks seemed like a lock a few weeks ago amid relentless demand for AI-linked shares, solid earnings and a history of seasonal strength. Now Wall Street isn’t so sure.The S&P 500 Index has gained 1.5% in December on average since 1945, trailing only November’s performance, data compiled by CFRA Research show. But with the US equities benchmark still on pace for a loss this month — even after Monday’s rally — the whole notion of seasonality is being called into question, especially with traders still jittery about artificial-intelligence valuations.Investors continue to show signs of wariness, with demand for hedges against losses in Big-Tech stocks near the highest since August 2024. And after three consecutive weeks of stock-market turbulence, the VIX Index is sitting above the 20 mark that typically signals mounting market stress.“Seasonality is always an investor’s friend, however it’s important to remember it’s not absolute,” said Dan Greenhaus, chief economist and strategist at Solus Alternative Asset Management LP.The S&P 500 rose 1.5% to 6,705.12 on Monday after Federal Reserve Governor Christopher Waller indicated support for an interest rate cut next month. The benchmark gauge is still down 2% this month and is on track for its first monthly drop since April. That compares with a long-term gain of 1.5% in November, per CFRA Research data.Ed Yardeni of eponymous firm Yardeni Research said the S&P 500 is unlikely to reach 7,000 by year-end, which would represent a roughly 4% gain from current levels, largely due to some profit-taking in AI-related stocks. At Roth Capital Markets, chief market technician JC O’Hara called for maintaining a cautious approach on stocks in a note Sunday.“Uncertainty on AI payoffs and upside rate risk will likely limit how much the market can rally into year-end,” said Dennis Debusschere, chief market strategist at 22V Research.While past performance overwhelmingly favours a year-end rally, investors are grappling with a murky backdrop marked by slowing economic growth, heavy spending on AI by American tech behemoths and division at the Fed about the pace of further rate cuts.Investors placed the odds of a cut at the December 9-10 policy meeting at about 70% on Monday after Waller advocated for easing next month. Still he said that a flood of delayed economic data to be released after the December gathering could make the January decision “a little trickier.”On the AI front, meanwhile, lofty valuations, circular financing deals, and sky-high expectations for growth have stoked skittishness around a potential bubble. The worries were highlighted last week when robust earnings from AI darling Nvidia Corp spurred big swings across equities rather than placating those concerns.Positioning data is also flashing mixed signals about what traders can expect in the remainder of 2025. A Deutsche Bank AG measure of equity exposure turned underweight last week for the first time since July, data compiled by the bank’s strategists including Parag Thatte show. But for mega-cap growth and technology shares, outperformance relative to the average stock is still at the top of its long-run trend channel despite the pullback, “leaving them vulnerable,” according to Thatte.For optimists, history skews in their favour against all of the nerves. Whenever the S&P 500 rose at least 10% from early January through September but declined in November — like currently — December followed with gains each and every time going back to 1950, according to data from JPMorgan Chase & Co’s trading desk.“We remain tactically bullish,” JPMorgan’s head of global market intelligence Andrew Tyler told clients in a November 24 note, citing resilient macroeconomic data, positive earnings growth, and a thawing trade war. “Additionally, historical seasonality stats also suggested a rebound.”

Wall Street’s risk machine didn’t break this week — Friday’s rebound spared it. But it flinched. And in doing so, it revealed how fragile the current market cycle has become. The shift was subtle, then sudden. For weeks, the riskiest trades in finance — crypto, AI stocks, meme names, high-octane momentum bets — had been slipping. On Thursday, that slow-motion retreat snapped. The Nasdaq 100 sank nearly 5% from its intraday peak, its sharpest reversal since April. Nvidia Corp at one point shed nearly $400bn despite beating earnings expectations.Bitcoin hit a seven-month low. Momentum names dropped in near-perfect sync. It was a vivid reminder of how easily pressure can cascade through crowded trades, and how markets powered by momentum and retail enthusiasm can buckle without warning. There was no obvious trigger. No policy shift. No data surprise. No earnings miss. Just a sudden wave of selling, and an equally abrupt recovery. What rattled investors wasn’t just the scale of the moves, but their speed, and what that speed suggested: A momentum-driven market, prone to synchronised swings and fragile under strain. “There are real cracks,” said Nathan Thooft, chief investment officer at Manulife Investment Management, which oversees $160bn. “When you have valuations at these levels and many assets priced for near perfection, any cracks and headline risks cause outsized reactions.” Thooft began paring back equity exposure two weeks ago, reducing exposure to equity risk in tactical portfolios from overweight to neutral as volatility picked up. He now sees a market that’s splintering, not with a single story, but with “plenty to cheer about for the optimists and plenty of worries for the pessimists.”The numbers are hard to ignore. Bitcoin is down more than 20% in November, its worst month since the 2022 crypto crash. Nvidia is heading for its steepest monthly decline since March. A Goldman Sachs index of retail-favoured stocks has fallen 17% from its October high. Volatility has surged. Demand for crash protection has returned. But the most visible tremors, and perhaps the most amplified, are playing out in crypto. The selloff in Bitcoin has mirrored the fall in high-beta stocks, strengthening the case that crypto is now moving in lockstep with broader risk assets.The short-term correlation between Bitcoin and the Nasdaq 100 hit a record earlier this month, according to data compiled by Bloomberg. Even the S&P 500 showed unusual synchronicity with digital assets. “There is perhaps an investor base — the more speculative and more levered segment of retail investors — that is common to both crypto and equity markets,” wrote JPMorgan strategist Nikolaos Panigirtzoglou, noting that blockchain innovation underpins a growing bridge between the two spheres.Ed Yardeni tied part of Thursday’s equity drop to Bitcoin’s plunge, calling the connection too tight to dismiss. And billionaire investor Bill Ackman offered his own comparison — claiming that his stake in Fannie Mae and Freddie Mac effectively acts as a kind of crypto proxy. That dynamic — in which digital tokens rise and fall alongside speculative equities — tends to fade in quiet markets, only to return in moments of stress. “Like the Rockettes, they all dance in lockstep,” said Sam Stovall, chief investment strategist at CFRA. “Bitcoin is a representative of the risk-on, risk-off sentiment on steroids.” While some claim crypto is leading the downturn, the case is thin. Institutional exposure is limited, and the asset’s price action tends to be more sentiment-prone than fundamental. Rather than setting the tone, crypto may simply register market stress in its most visible — and visceral — form: A highly leveraged, retail-heavy barometer where speculative nerves show first.Other explanations for febrile stock trading are technical: Volatility-linked funds shifting exposure, algorithmic flows tipping thresholds, options positioning unwinding. But all point to the same conclusion: In a crowded market, even small tremors can cascade. Thursday’s sharp reversal only magnified that anxiety. The so-called fear gauge, the VIX, spiked to its highest level since April’s “Liberation Day” selloff. Traders rushed to buy crash protection. Adrian Helfert, chief investment officer at Westwood, was among those who had already begun repositioning in recent weeks, adding tail-risk hedges in anticipation of a regime shift. The crypto slump reinforces the broader retreat from risk assets, he said. “Investors are viewing it less as a safe haven and more as a speculative holding to shed as market fear rises, leading to deleveraging and rapid ‘despeculation’ across high-risk segments,” Helfert said. “This is reinforcing the move away from risk assets.”Even Nvidia’s blowout earnings couldn’t hold the line. Despite topping expectations, the AI heavyweight fell sharply during the week, underscoring the broader pressure on tech valuations. The Nasdaq 100 notched its third straight weekly loss, shedding about 3%. Retail flows into single-name stocks also flipped negative for the week, according to JPMorgan estimates. And though the market bounced Friday — following dovish comments from New York Fed President John Williams — the rebound did little to erase the deeper sense of unease.All of it points to a retreat from the frothiest parts of the market, where AI exuberance, speculative positioning, and cheap leverage have powered much of this year’s gains — and where conviction is now harder to find. And until recently, crash protection was difficult to justify. Risk assets had rallied hard since May, and those betting against the boom had repeatedly been burned. But now, even long-time bulls are looking over their shoulders. “A lot of folks who have done well are right now discussing 2026 risk budgets, and obviously AI concerns are top of mind,” said Amy Wu Silverman, head of derivatives strategy at RBC Capital Markets. “A number of investors I have spoken with have wanted to hedge for a while. We jokingly call them the ‘fully invested bears.’”

With US stocks in the midst of a grim month, investors will look in the coming week for signs of strength in the US consumer with Black Friday putting the spotlight on the holiday shopping season. The rally in stocks has stalled in November, with the benchmark S&P 500 declining more than 4% so far during the month.Strong quarterly results from semiconductor giant Nvidia Corp failed on Thursday to calm markets, which have been rattled by concerns about elevated valuations and questions about returns on massive corporate investments in artificial intelligence infrastructure.Consumer spending, which accounts for more than two-thirds of US economic activity, will now come under Wall Street's microscope. The trading week will be interrupted by the Thanksgiving holiday on Thursday, followed by Black Friday, known for ushering in discounts, then Cyber Monday and holiday shopping promotions heading into year end.Recent readings have shown a slump in consumer sentiment, while other data has been missing due to the government shutdown. This could make any signals about holiday spending more significant than usual. "From a sentiment standpoint, the early reads we get on Black Friday and Cyber Monday, due to the lack of data we have, will be important," said Chris Fasciano, chief market strategist at Commonwealth Financial Network. "The entirety of the holiday shopping period will be an important read for where we are with the consumer and what that means for the economy."While the S&P 500 remains up 11% year-to-date, it has declined just over 5% from its late October all-time high. The Cboe Volatility index on Thursday posted its highest closing level since April. Stock market performance could factor into how consumers spend over the holidays, particularly those with higher incomes who are more invested in equities.Despite the recent wobble, the S&P 500 has soared over 80% since its latest bull market began just over three years ago. "If you get a pullback there, a lot of the wealth in the upper income is in the stock market... so it will be interesting to see if they spend like they have in the past," said Doug Beath, global equity strategist at the Wells Fargo Investment Institute.This month, the National Retail Federation said it expected US holiday sales to surpass $1tn for the first time. Still, that November-December forecast equated to growth of between 3.7% and 4.2% from the year-earlier period, slower than the 4.3% growth in 2024.Household balance sheets are "in a very strong place," yet slowing employment growth could pressure holiday spending, said Michael Pearce, deputy chief U.S. economist at Oxford Economics. "The most important factor for consumer spending is the health of the labour market," Pearce said. Data from the delayed monthly employment report released on Thursday showed US job growth accelerated in September.But the unemployment rate increased to a four-year high of 4.4%. Persistently firm inflation, with import tariffs contributing to higher prices, also could weigh on spending, Pearce said. Holiday shopping is critical for retailers.Walmart on Thursday raised its annual forecasts in a signal of confidence heading into year end. Reports from other retailers during the week were mixed. Another read on the consumer will come with Tuesday's release of US retail sales for September.That report has been delayed along with other government releases because of the 43-day federal shutdown that ended earlier this month. The influx of pent-up data in the coming weeks could further ramp up volatility for investors as they assess the economy's health and prospects that the Federal Reserve will cut interest rates at its December 9-10 meeting.Following the September jobs report, which will be the last monthly employment release before the next Fed meeting, Fed funds futures late on Thursday reflected a 67% chance the central bank would hold rates steady in December after quarter-point cuts in each of the prior two meetings. Morgan Stanley economists said on Thursday they no longer expected the Fed to ease in December but they project three cuts in 2026. "The policy rate path remains highly data-dependent," the Morgan Stanley economists said in a note. "In our view, a mixed report means the committee will want to see more data before taking another step."

By conventional indicators, the valuation of technology stocks has risen this year to take them into bubble territory. Valuations that reached multiples of forward earnings scarcely seen before indicated that they were priced for perfection. So a fall in valuations since mid-October was not a surprise.This dip may reflect caution and profit-taking. It may presage a bigger fall, or it may be a pause in a long bull market accompanying the AI revolution. The indicators are not all pointing in the same direction.So far, the stock market slide is just a correction. Markets fell in the first week of November. They nudged upwards in the week commencing Monday 10th, but then fell at the end of the week. The market as a whole remains at elevated levels compared with April, when there was a drop associated with President Donald Trump’s announcement on tariffs. To take just one example: Nvidia fell around 10% in the first week of November, but it was still around 60% higher than it was just six months earlier. The S&P 500 dipped to 6,700 on 14 November, which compares with a high of 6,920 but a low of 4,835 over the previous 12 months, and remains nearly 70% higher than November 2022. The dominance of large technology companies in aggregate market valuations has become pronounced. By the end of October, while the S&P had risen through most of the year, during that period some 397 of the stocks actually fell in value. Eight of the 10 biggest stocks in the S&P are tech firms. They account for 36% of the entire US market value, and 60% of the gains since April.Palantir Technologies, a business applications software specialist, reached a peak valuation of 230 times future earnings. In early November, it was revealed that prominent hedge fund manager Michael Burry took a $912mn position against Palantir, whose stock has fallen from over $200 per share to around $170, though remains more than 150% higher over the year. Mr Burry later closed his hedge fund Scion Asset Management.There has been an uneven pattern to the sell-off, following earnings reports in late October. Meta, the owner of Facebook, fell 12% over concern of its high investment levels in AI, given disappointing returns from its investment in virtual reality, though has recovered slightly. Alphabet, the owner of Google, rose 3%, though has since dipped by around 5%, and Microsoft fell by just 3%, then fell further before a partial recovery.Unlike the dotcom start-ups of 25 years ago, the tech firms have strong revenues and a sound business model. Their services extend far beyond AI, covering business application software and cloud computing. In the case of Amazon, it is a general retailer as well as a tech firm. A strong argument is that much of the investment in AI is from large, profitable companies with a strong cash position.The hyper-scalers, Amazon, Meta, Alphabet and Microsoft, all have strong underlying global businesses. The scale of the investment in data centres being planned has caused some investors to be concerned, however. Some tech firms have been issuing bonds; for example, in late October Meta announced a $25bn bond issuance to finance AI investment, following Oracle’s $18bn bond sale in September. In early November, yields on big tech firms’ bonds started to rise. Oracle’s stock suffered bigger falls in the middle of November, with investors concerned over debt, heavy reliance on OpenAI, negative free cash flow. It emerged that the outgoing CEO Safra Catz sold $2.5bn of Oracle shares this year.Also, 10 loss-making AI specialist start-up companies have between them been valued at nearly $1tn, while there have been patterns of circular financing, especially concerning OpenAI.Another dimension is that there is softening economic data from the wider economy. With the US government lockdown entering its second month, there has been no official jobs data since 5 September. Analysts and economics have been relying on private sources. Data from the private company Challenger, Gray and Christmas showed the highest level of October job lay-offs since 2003, while the payroll company ADP reported that US companies shed 32,000 jobs in September, the biggest fall in two and a half years.Earnings from mainstream businesses have disappointed. The stock of the popular restaurant chain Chipotle fell 13% in late October following disappointing quarterly results.The price of bitcoin has been unpredictable in recent weeks. It often rises in a counter-cyclical manner, increasing as stock market falls, but cryptocurrencies generally were off their highs at the time of the wider market correction. Bitcoin fell from around $125,000 on 7 October to just below $100,000 by mid-November. Many bitcoin investors are leveraged, and some forced, automated sales are likely to have occurred, accelerating and drop in price. Gold has fallen from a high of $4,400 per ounce to around the $4,100.The AI investment industry is one of the few sectors to be registering growth, so if technology firm leaders fall short of their ambitions, the impact would ripple outside the industry.Against that, the bearish commentators point to the relatively narrow foundation of asset price investment, and debt and macro-economic fragility in the higher-tariff era, a combination that compares unfavourably with the more benign macro-economic picture of 2000-2001.The emerging technology of AI comes during an extended period of cheap money and globalisation, including of retail investing, and rapid growth of private credit. The worldwide exposure of investors to US stocks are part of a highly inter-connected system. High levels of government debt limit the extent of any fiscal stimulus following a shock. A loss in market value of the same proportion as the dotcom crash would have a far bigger impact on the real economy. The economist Gita Gopinath has estimated that it would cause a loss of $20tn for US households, or 70% of GDP. Foreign investors might lose $15tn.There are two dimensions to risk assessment: Likelihood, and impact. The likelihood of an asset price collapse that is equivalent in proportional terms to that of the dotcoms would not appear to be high, although it is possibility. The impact would be seismic, and felt across the global economy.The author is a Qatari banker, with many years of experience in the banking sector in senior positions.

Some of the year’s most popular emerging-market trades such as betting on the Brazilian real and stocks linked to artificial intelligence are becoming a source of concern as money managers warn of risks from overcrowding.Wells Fargo Securities sees valuations for Latin American currencies — among 2025’s top carry trade performers — as detached from fundamentals. Fidelity International is concerned about less liquid markets in Africa that it sees at risk should global volatility spike. Lazard Asset Management meanwhile is keeping its guard up after early November’s firesale in Asian tech stocks — the worst since April.“Investors are too complacent on emerging markets,” said Brendan McKenna, an emerging-market economist and FX strategist at Wells Fargo in New York. “FX valuations, for most if not all, are stretched and not capturing a lot of the risks hovering over markets. They can continue to perform well in the near-term, but I do feel a correction will be unavoidable.”Such caution isn’t without reason. Many parts of the developing-markets universe look overheated after a heady cocktail of Federal Reserve rate cuts, a softer dollar and an AI boom drove stellar gains. The very flows that propelled the rally are now posing the risk of sudden drawdowns that have the potential to ripple through global sentiment and tighten liquidity across asset classes.A quarterly HSBC Holdings Plc survey of 100 investors representing a total $423bn of developing-nation assets showed in September that 61% of them had a net overweight position in local-currency EM bonds, up from minus 15% in June. A Bloomberg gauge of the debt is on track for its best returns in six years.The MSCI Emerging Markets Index of stocks has risen each month this year through October — the longest run in over two decades. Up almost 30%, the gauge is headed for its best annual gain since 2017, when it rallied 34%. That was followed by a 17% slump in 2018 when a more hawkish than expected Fed, a US-China trade war and a surging dollar took the wind out of overcrowded EM stocks as well as popular carry — in which traders borrow in lower-yielding currencies to buy those that offer higher yields — and local-bond trades.“As we approach year-end, there is a risk that some investors look to take profits on what has been a successful trade in 2025 and that this leads to a rise in volatility in FX markets,” Anthony Kettle, senior portfolio manager at RBC BlueBay Asset Management in London, said in reference to local-currency bonds.Stock traders in Asia this month had a first-hand experience of the risks that come with extreme valuations and crowding, when the region’s high-flying AI shares took a sudden nosedive. While tech stocks sold off globally, analysts have cautioned that the risk in some Asian markets are even more pronounced given the sector’s relatively higher weighting in their indexes.One notable example is South Korea’s Kospi — the world’s top-performing major equity benchmark in 2025, with an almost 70% jump. As volatility spiked, the gauge plunged more than 6% in one session before paring half of the losses by the close. “Positioning in Korea’s AI-memory trade is extremely tight,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore.Rohit Chopra, an emerging-market equity portfolio manager at Lazard Asset Management in New York, has turned cautious after the tech rout.“From a factor perspective, lower-quality companies have been outperforming higher-quality peers,” he said. “Historically, this divergence has not been sustained, suggesting the potential for a reversal if positioning remains concentrated.”Chopra co-manages the Lazard Emerging Markets Equity Portfolio, which has returned 23% over the past three years, beating 95% of peers, according to data compiled by Bloomberg.Options traders appear to be turning bearish on the Brazilian real, which has delivered carry trade returns of around 30% this year. Three-month risk reversals rose to a four-year high earlier this month.The real is the best example of an asset that has had a good run this year and where positioning has now become crowded, said Alvaro Vivanco, head of strategy at TJM FX. There are renewed fiscal concerns for Brazil, which is another reason to be more cautious, he said.Other Latin American currencies such as Chile’s, Mexico’s and Colombia’s are also “looking a little rich,” said Wells Fargo’s McKenna.The trade-weighted value of the Colombian peso is at the highest in seven years, according to data from the Bank of International Settlements, and is one standard deviation above the 10-year average. The same gauge for the Mexican peso is 1.4 standard deviations above the average.Bonds in some frontier markets also emerged as beneficiaries when a broader investor shift away from US assets gathered pace this year. Asset managers such as Fidelity International are now sounding caution on them.“More concerning to me are trades where a sudden rush for an exit can overwhelm the natural buyer base,” said Philip Fielding, a portfolio manager for Fidelity. Markets such as Egypt, the Ivory Coast or Ghana “can also be illiquid in times of higher volatility,” he added.Fielding is the lead manager for the $538mn Fidelity Emerging Market Debt Fund that has returned about 12% in the past three years, beating 84% of peers, data compiled by Bloomberg show.