Reference News Network, November 27 report: Spain's "El Economista" website reported on November 24 that Wall Street is experiencing a widespread "tech fatigue." Analysts' focus is on the dizziness caused by high valuations of AI-related companies. As blind trust in the commercial potential of this new technology is gradually replaced by a more cautious attitude, these companies are now showing increasing fragility. They must now prove the rationale for their massive investments through financial performance. However, experts point out that this is just one aspect of the tech "fatigue," which has long been prevalent in high-risk assets such as cryptocurrencies. Experts say that the two main engines driving the seemingly endless rise on Wall Street are now slowly "fading out," triggering the depletion of "infinite liquidity."
One of the two engines is consumer fatigue, which has already shown up in retail companies' earnings and the weakening job market. Consumer confidence and strength were key to the recent rally that started in 2023. At that time, households and individuals flooded the market with great optimism. As confidence weakens, investors are seeking safer assets and selling stocks, especially high-risk ones like tech stocks and cryptocurrencies.
Secondly, some analysts have warned that arbitrage trading is being unraveled. They particularly emphasized Japan's situation, where rapidly declining Japanese government bond yields have led to large-scale arbitrage trades being unwound, and the yen has also weakened.
The latest report from French LFDE Asset Management highlights that as American consumers' purchasing power declines, their ability to invest in the market will also weaken. Americans are clearly feeling fatigued in both consumption and investment.
Macroeconomic data also shows a clear trend of weakness. The latest University of Michigan consumer confidence survey report indicates that the U.S. consumer confidence index has dropped to 51. This year, the consumer confidence index has plummeted by 7.5 points, reaching a historical low. At the same time, expectations about personal financial conditions have fallen to the lowest level since 2009. The report states that consumers are frustrated by persistently high prices and constantly decreasing income.
LFDE Asset Management stated that all these companies feel the economic cooling for different reasons. "Inflation remains relatively high, the employment situation is weak... numerous adverse factors are prompting Americans to reduce spending."
LFDE Asset Management said that the above reasons have led to the decline in cryptocurrencies and unprofitable tech stocks. Bitcoin has fallen 30% from its annual high, and Ethereum has dropped 41%. The rise of these assets reflected the excess liquidity flooding the market. According to Bank of America, their decline indicates that the market has reached a peak, and "cryptocurrencies are at a critical point of liquidity and speculation."
LFDE commented: "Given the current valuation levels, fundamental investors are unwilling to make large investments, while systematic funds only amplify price fluctuations, but individual investors are often the main buyers."
In addition, "although the AI ecosystem has raised many concerns and questions, this is a medium- to long-term issue. In the short term, we may be more concerned about the situation of ordinary Americans. This means that we need to pay more attention than ever to the most important factor determining family financial health: employment."
The U.S. labor market is showing serious signs of slowdown. This began this summer, although employment growth data was positive, it was later significantly revised. From April 2024 to March 2025, the actual number of non-farm jobs added was 911,000 fewer than previously reported. The labor market is the cornerstone of the U.S. economy, and wage levels are the driving force behind households' active investments.
Bank of America warned that another worrying aspect is emerging. "Due to the unwinding of arbitrage trading, bullish positions in U.S. risk assets have been hit by record liquidity." The bank stated that these assets had been boosted by "market sentiment triggered by large-scale rate cuts."
The unraveling of arbitrage trading has already begun, with large-scale repatriation of overseas assets by Japanese investors. Previously, Japan's new Prime Minister Shiozaki Hayato announced a large-scale fiscal stimulus plan. This sparked a trend of capital flowing back into the Japanese market. Japan holds $3.62 trillion in overseas assets and bonds globally. (Translated by Wang Meng)
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