{"id":17953,"date":"2025-11-17T11:30:31","date_gmt":"2025-11-17T19:30:31","guid":{"rendered":"https:\/\/canary.kcprod.info/blog\/?p=17953"},"modified":"2025-11-18T09:16:12","modified_gmt":"2025-11-18T17:16:12","slug":"vested-interest-market-volatility-ai-data-center-debt-shutdown-spending","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/vested-interest-market-volatility-ai-data-center-debt-shutdown-spending\/","title":{"rendered":"Vested Interest: Why Has the Market Been So Volatile? Well, It\u2019s a Bunch of Things."},"content":{"rendered":"\n

This post is brought to you by Vested Interest, our forthcoming newsletter about what the financial and economic <\/em>news<\/em><\/a> might mean for your money, career, and life in general. Please get in touch via <\/em>askwealthfront@wealthfront.com<\/em><\/a> with comments and questions about other topics you\u2019d like us to cover.<\/em><\/p>\n\n\n\n

The last two-plus weeks in the stock market have been a roller coaster \u2014 and look, we were as reluctant to use that metaphor as you\u2019d imagine, but what else are you going to call something that goes way down and then way up? Over a period of a week earlier this month<\/a>, the NASDAQ fell 6%, its biggest drop since April\u2019s \u201cLiberation Day\u201d; other major indexes were down big too<\/a>. Then they spent most of last week climbing in the other direction amid headlines about rallying<\/a>, rebounding<\/a>, roaring back<\/a> and setting record highs<\/a> \u2014 before falling again<\/a> on Thursday.<\/p>\n\n\n\n

What\u2019s going on? Well, unlike with Liberation Day, there isn\u2019t one single story driving the action. Rather, there are a bunch of reasons to be pessimistic and <\/em>a bunch of reasons to be optimistic right now, and they\u2019re colliding to create volatility in the market. Basically, the economy is fighting with itself about whether the economy is good or not. Let\u2019s review the major data points and arguments involved.<\/p>\n\n\n\n

1. Yes, AI is number one. <\/strong>The biggest question of all is whether AI is a bubble, or to be more specific, whether the so-called Magnificent 7 technology stocks<\/a> are overvalued. Compare the stock prices of companies in the S&P 500 to their recent earnings \u2014 that\u2019s P\/E ratio<\/a> \u2014 and you\u2019ll find that prices are even higher, relative to profits, than they were before the original 2000s internet crash. <\/p>\n\n\n\n

That could be a sign of overhype. On the other hand, a lot of people believe LLMs and chatbots and AI start-ups will<\/em> be world-changing, and that chipmakers like Nvidia and cloud-computing titans like Microsoft will earn enough from them to justify their prices. But if you could point to any one reason for the recent stock slide, it would probably be Meta\u2019s Oct. 30 announcement<\/a> that it\u2019s going to be spending even more on AI infrastructure than expected despite maybe not having a clear plan for monetizing AI<\/a>.<\/p>\n\n\n\n

2. Debt (in unusual forms). <\/strong>Adding to the concern is that high-flying tech companies have been borrowing lots of money to fund AI investments \u2014 and doing so in, let\u2019s say, creative ways<\/a> that have reminded some observers of the arrangements that contributed to the Great Financial Crisis in 2007 and 2008<\/a>. (Bloomberg, for its part, mentioned the even earlier bankruptcy of Enron in its writeup<\/a> of one such deal.) Add that to some high-profile debt defaults in other industries<\/a> and it\u2019s another reason for unease.<\/p>\n\n\n\n

3. Troubling numbers (and missing numbers). <\/strong>While the government shutdown was ongoing, investors and their friends at the Federal Reserve didn\u2019t have access to official employment or inflation data. And the privately gathered numbers that did come in were inauspicious: The University of Michigan\u2019s consumer confidence survey found the population at its most pessimistic in years<\/a>, while one measure of layoff announcements clocked<\/a> a record number of monthly reductions. <\/p>\n\n\n\n

4. A better national and international outlook.\u00a0 <\/strong>There was supposed to be some positive stuff in here, right? Indeed, there is: For one, the government is open again, which means millions of people are going to be getting (and spending) paychecks and benefits that were on hold<\/a>. Legal experts also suspect<\/a> the Liberation Day tariffs are going to be struck down by the Supreme Court, and if there\u2019s one thing we learned this spring, it\u2019s that Mr. Market<\/a> would likely celebrate such a ruling. The Fed could cut interest rates again in December, which would be expected to boost spending (although at the moment investors are divided<\/a> about whether that will happen, and the anticipated likelihood of a cut has been fluctuating). And despite post-Liberation Day fears that the rest of the world was going to stop buying Treasury bonds and conducting transactions in dollars, that just hasn\u2019t happened<\/a>.\u00a0<\/p>\n\n\n\n

5. Money is still flowing. <\/strong>For all the U.S. consumer\u2019s self-reported anxiety, actual consumer spending continues apace. A hearty 82% of public <\/strong>companies reporting their Q3 revenues \u201csurprised on the upside,\u201d i.e. made more than they\u2019d expected, according to FactSet data<\/a>. And the National Federation of Retailers is forecasting<\/a> that consumers will spend more than $1 trillion for the first time during the holiday gift-giving season.  <\/p>\n\n\n\n

So what does it mean for you? <\/strong>At Wealthfront, we don\u2019t endorse any particular view about where the U.S. economy is headed, nor encourage buying or selling on the basis of such predictions. Our point is merely that there are indicators you could use to make just about any case you want at the moment \u2014 and an evident lack of consensus about which ones are most important. <\/p>\n\n\n\n

If anything, the past few weeks are a reminder that while the current bull market has lasted for quite a while, stock performance is always liable to reverse quickly<\/a>. That\u2019s what diversification across companies and asset classes is meant to help lessen the impact of, and why those nearing retirement or planning a major purchase often shift money into more stable holdings like bonds. Volatility is, in some ways, the most predictable part of investing there is.
<\/p>\n","protected":false},"excerpt":{"rendered":"

This post is brought to you by Vested Interest, our forthcoming newsletter about what the financial and economic news might mean for your money, career, and life in general. Please get in touch via askwealthfront@wealthfront.com with comments and questions about other topics you\u2019d like us to cover. The last two-plus weeks in the stock market […]<\/p>\n","protected":false},"author":10038,"featured_media":17955,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1315],"tags":[],"coauthors":[2542],"class_list":["post-17953","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-industry-insights"],"acf":[],"yoast_head":"\nWhy the Market's Been So Volatile | Wealthfront<\/title>\n<meta name=\"description\" content=\"There isn\u2019t one single issue driving the stock market roller coaster. 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