The U.S. stock market entered a notably shaky phase Monday, with major indexes sliding sharply as investor confidence falters and risk-assets broadly falter. The S&P 500 fell about 0.9 %, the Dow Jones Industrial Average dropped roughly 1.2 % (557 points) and the Nasdaq Composite slipped 0.8 %.
Tech under pressure
The tech sector, which had been powering much of the market’s gains, is now showing cracks. A surge in valuations tied to artificial-intelligence (AI) enthusiasm has fueled caution among investors. The tech-heavy Nasdaq may be on the verge of snapping a seven-month winning streak as valuation concerns and a possible “AI bubble” take centre stage. Companies like Nvidia Corporation, Tesla Inc., Apple Inc., and Meta Platforms Inc. face steep expectations, and when the narrative shifts, investors are quick to pull back.
Crypto’s mirror move
At the same time, crypto markets are not immune to the chill. The largest cryptocurrency, Bitcoin, recently dropped below $92,000, wiping out its 2025 gains and entering a bear-market zone (a drop of 20 %+ from recent highs). Meanwhile, Bitcoin’s correlation with the Nasdaq has surged to the highest level in years, while its link to traditional safe-havens like gold has collapsed. This suggests Bitcoin is behaving more like a high-beta tech asset than a diversifier in times of stress. These developments raise questions about crypto’s role in a diversified portfolio now that it is moving more in tandem with equities rather than counter-cycling them.
Gold’s peculiar move
Normally viewed as a refuge, gold has also faltered, declining alongside stocks — an indication of broad‐based investor de-risking rather than selective asset rotation. Some analysts warn that gold’s sell-off in lockstep with equities could be an ominous sign of systemic stress spilling into commodities as well.
Bear market signals stacking up
Taken together, these moves across stocks, crypto and gold suggest that we may be transitioning into a “bear market” for risk assets broadly. Key indicators such as stretched valuations, elevated margin debt, technical breakdowns in major indexes and synchronized asset class weakness all point to increased vulnerability. While a bear market — broadly defined as a 20 % drop from recent highs — may not yet be fully confirmed across all asset classes, the warning lights are flashing.
What’s driving it?
Several interlinked forces are at play:
- Monetary policy uncertainty: With inflation sticky and the Federal Reserve hinting at a less aggressive path for future rate cuts, the risk-free rate has risen and discount rates for future profits have climbed.
- Valuation excess: The frothy valuations in sectors like AI and growth stocks make them particularly vulnerable should growth slow or earnings disappoint.
- Risk-off sentiment: When investors panic or de-risk, they often exit ‘everything’ — not just equities. The fact that gold and crypto are both under pressure suggests a broad shift, not a mere sector rotation.
- Leverage and momentum unwind: With many hedge funds, algorithmic traders and retail investors heavily exposed to momentum trades in tech and crypto, a reversal can cascade quickly.
What comes next?
Investors may face several possible paths:
- A deep pullback where equities fall 20 % or more, crypto declines even further, and gold eventually rebounds as a true safe-haven.
- A brief consolidation where markets pause and stabilize before resuming upside — contingent on favourable earnings, inflation data or central-bank signals.
- A rotation into value, defensive sectors or real assets — although gold’s current weakness suggests even the typical safe-haven rotation is not yet firmly underway.
In any case, the broad-based softness across tech, crypto and gold suggests the easy gains may be behind us. Investors may need to reassess their risk posture and reduce reliance on the notion that “everything goes up together.”
Final word
Markets are flashing warning signals: valuations stretched, risk assets correlated, traditional hedges weakening. Whether this turns into a full bear market or a shallower correction remains uncertain — but what’s clear is that the era of broad-based, momentum-driven gains is on shaky ground. For those holding tech stocks, crypto, or even gold as a hedge, the time to reassess may already be here.
Sources
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