Sou Hu Cai Jing·2025-11-21 16:43Market Movements - Global financial markets experienced a sudden downturn, with major indices across New York, London, Tokyo, and Sydney all significantly declining [3] - The S&P 500 index fell below key support levels, while the Nikkei 225 index saw a dramatic drop of over 3% in a single day [3][9] - The VIX index surged by 15%, reaching a near three-month high, indicating a sharp increase in market fear [3] Fed Policy Expectations - A month ago, the market was almost certain that the Federal Reserve would cut interest rates in December, with a 94% probability according to CME's FedWatch tool [5] - By mid-November, this probability plummeted to around 47%, suggesting that the market now believes the Fed is more likely to maintain current rates [6] - Recent hawkish comments from Fed officials have dampened previous optimistic expectations, leading to increased market volatility [7] Japan's Economic Crisis - Japan's economy shrank by a negative annualized growth rate of 1.8% in the third quarter, with weak domestic demand and export challenges [10] - The Japanese government is planning an unprecedented stimulus package, expected to exceed last year's 13.9 trillion yen, raising concerns about increased government debt [10] - The Nikkei 225 index fell by 3.2%, while the yield on 10-year Japanese government bonds rose above 1.75%, nearing the highest level since 2008 [10] AI Bubble Concerns - AI concept stocks, which had been performing well, faced significant sell-offs, raising doubts about their ability to generate sufficient revenue to justify high valuations [11] - Major tech companies like Nvidia and AMD saw substantial stock price declines, with institutional investors like Bridgewater and SoftBank reducing their holdings in Nvidia [11] - The financing environment for tech companies is worsening, as firms like Amazon and Google issued over $80 billion in bonds, increasing liquidity pressure [11] Broader Market Reactions - The downturn in the stock market affected other asset classes, with Bitcoin prices dropping below $90,000 and other cryptocurrencies also experiencing significant declines [13] - European markets were not spared, with the Euro Stoxx 50 index falling by 1.85% and concerns about the Eurozone's economic fundamentals persisting [13] Future Outlook - Investors are questioning whether the current market correction is a healthy adjustment or the beginning of a larger downturn [15] - Some analysts view the recent market turmoil as a "healthy correction," while others warn of potential bubbles in the U.S. stock market, as indicated by the Buffett Indicator exceeding 240% [15][17] - Upcoming economic data releases, including employment and inflation reports, will be crucial in shaping market expectations for the Fed's December meeting [17]