The financial markets are belief systems. They believe in earnings, in productivity, in institutions.
When those beliefs hold, valuations stretch upwards. But when they crack, everything snaps.
On Monday, $1.4 trillion in stock market value vanished. The Dow Jones has had its worst April since 1932.
The S&P 500 is now delivering the weakest performance for any US president since 1928.
Investors are worried. The dollar is plunging, bond yields are rising, and safe-haven assets are seeing increased demand.
This tells us that something in the market has broken.
Exactly 25 years ago, the dot-com bubble burst. Back then, investors poured money into any company that had a website.
When the stories failed to turn into results, valuations collapsed. The Nasdaq dropped 78% in two years. Cisco lost 86%. Amazon fell 95%.
Today’s version is playing out in AI. The excitement is real. The technology is real. But once again, expectations are priced as if nothing can go wrong.
Nvidia is trading at more than 30 times sales. That’s not just expensive. It’s historically rare and hard to justify when risk enters the system.
But the real risk here is not about the technology. It’s about policy.
Nvidia has been unusually compliant with US export rules, even redesigning chips (H20, A800, etc.) just to stay in the Chinese market.
But the administration keeps moving the goalposts. Now with a $5.5 billion charge and $16 billion in potential fiscal-year losses, investors are waking up to the geopolitical fragility of Nvidia’s business model.
When 13% of your revenue is at risk and you have zero control over the policy driving it, markets will reprice.
This isn’t just about one company. AMD and Broadcom also dropped sharply.
The market is waking up to a deeper realization: the US semiconductor dominance can no longer be taken for granted.
The ban that was supposed to slow Chinese progress may have done the opposite.
Huawei has now become the default supplier for Chinese data centers and AI labs.
The 910C gives Beijing a platform to build on. It’s not cutting-edge, but it’s theirs.
Read more: Is China tech already leading the AI race?
Is this just about tech?
No. The bigger story is what this says about market confidence. Investors are not just responding to trade bans or earnings misses.
They’re responding to a growing sense that the rules of the game are unstable.
Last week, President Trump threatened to fire Fed Chair Jerome Powell. He publicly blamed him for “slowing the economy” and called him a “major loser” on social media.
Legally, removing the Fed chair isn’t simple. But even the threat signals something markets have long resisted: the politicization of monetary policy.
Such a scenario would be catastrophic to the US economy.
Central bank independence is one of the foundations of modern market stability.
Undermining it sends a message to global investors that the US may no longer be a predictable steward of capital.
The real risks
The recent selloff is not entirely about fundamentals. Corporate earnings are still coming in, and many firms have beaten expectations.
But markets don’t just trade on profits. They trade on predictability.
The bond market has not reacted as expected. Typically, when stocks fall, bonds rise. This time, 10-year Treasury yields rose to 4.4%.
The US dollar dropped to its lowest level in three years.
Tariffs may have triggered the selloff, but they’re no longer the story. The deeper concern is randomness. Investors can tolerate bad policies.
What they can’t tolerate is policies that change overnight.
It seems that Trump’s goal is to force the Fed’s hand and lower interest rates. After all, the President made similar comments back in 2018 and 2019.
While this may offer some boost to riskier assets and US equities, it’s unlikely to become the comeback story many are hoping for.
Where is the capital going?
With stocks falling and bonds failing to hedge, money has been moving into gold.
On Monday, gold futures hit another all-time high. The VIX, the market’s volatility index, remains elevated. But this is not panic selling. It’s a repositioning.
Bearish sentiment among US retail investors remains entrenched, with the American Association of Individual Investors reporting pessimism above the 50% mark for eight consecutive weeks — the longest stretch since the organization began tracking the data in 1987.
This suggests investors are no longer waiting for clarity. They’ve made up their minds. And in many cases, they’re reallocating capital outside the US entirely.
Markets have seen recessions before. They’ve seen earnings downgrades, wars, and even bank failures. What they struggle with is disorder.
So the question isn’t whether the US economy is still strong. It’s whether investors still believe it’s a safe place to put their money. And right now, they’re starting to say no.
