Why Stocks Have Dropped

Markets are reacting to voices from the Fed that suggest fewer or later rate cuts than many investors expected. For example: “Traders slashed the odds of a December rate cut … after a string of Fed officials voiced skepticism” about further easing.

Why Stocks Have Dropped

1. AI Valuation Bubble Fears
   • Many investors are worried that AI-related stocks (like Nvidia, Palantir, Broadcom) are overvalued.
   • Some suggest this might be a “bubble,” leading to a sharp reevaluation.
2. Interest Rate Cut Uncertainty
   • The Federal Reserve may not cut interest rates as soon as the market expected
   • Higher bond yields are making equities less attractive.
3. Government Shutdown & Data Drought
   • The U.S. government shutdown is delaying key economic data, making it harder for investors to judge the health of the economy.
   • This increases uncertainty around future policy decisions (including monetary policy).
4. Weakness in Big Tech / AI Sector
   • Big tech companies, especially those linked to AI, have seen sell-offs.
   • Some of these companies had very high earnings multiples, and now investors are taking profits and rotating out.
5. Global Economic Concerns
   • There are fears about a slowdown in China’s economy, which is weighing on global markets.
   • Trade policy risk and geopolitical uncertainty (e.g., tariffs, policy instability) also contribute.
6. Profit-Taking / Sector Rotation
   • After strong gains, especially in tech / AI, investors are rotating from high-growth, high-risk areas into more defensive or stable sectors.
   • Some see this as a correction, not necessarily the start of a prolonged crash.