What happened?
The market festival rages all year round and suddenly everyone has a hangover. The S&P 500 has fallen four days in a row and today the Nikkei is down 2%.
The pain is also starting to trickle down to FX, with AUD/USD falling in early Asia-Pacific trading. If it manages to cross 0.6388, it will be a new low since November.
AUDUSD 10 minutes
When you zoom out on bonds and AUD/USD, you wonder if stocks are living on borrowed time. April is supposed to be a strong seasonal and it didn’t work as the seasons turn in May. Fed rate cuts are evaporating and it looks like the market could collapse if Powell says “we may have to hike again.”
AI probably provides the majority of this, which is justified, but remains subject to major risks. Nvidia’s momentum has faded and if we don’t get another quarter of sensational profits, there could be a rush for the exits.
What’s going to happen ?
I think everything will be fine. This is probably just a hiccup as the Fed and other central banks will cut rates and inflation will fall, but I can certainly see both sides of the debate and this appears to be a key moment.
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