Risk off

This might be a fine week to head to the cottage. Or stay inebriated.

Expect markets to gyrate as investors absorb all this latest, unnerving news. Friday was a corker.

The Chinese upstart MoonshotAI had the Nasdaq in a funk after release of its open-source model, Kimi K3. Apparently this is almost-nearly-shockingly as good as the latest out of US frontier labs like Anthropic. And, as mentioned, it’s free. China has adopted a very different approach to AI development, at least so far, stressing cooperation instead of corporate greatness and the minting of trillionaires. No wonder models from that country are being adopted globally.

So, yeah, US investors are spooked. Risk is coming off that table. Tech stock valuations have taken a hit. That $100-a-share crash in SpaceX shares is a handy example. Now people are truly worried that $800 billion spent on data centres this year by the big guys – Meta, Amazon, Apple, Microsoft, Oracle – could be insane. Free is better.

In case you missed it (by beer drinking at the lake) the US tech sector has been clobbered. In less than 20 trading days it lost 40% of its recent momentum with semi-conductor companies slumping into a bear market (losing 20% or more in valuation)

The reasons are many, including too much leverage by aroused investors which had pushed tech companies (like Nvidia) into space. Things climbed to dangerous levels, then imploded. No surprise there.

Mr. Market wants proof the massive boatloads of money flowing into AI infrastructure will actually end up generating equal profits, not just drain these corps. The competition globally – namely from China – has stoked fears the US may not be an AI leader much longer And now oil prices are rising again, pushing bond yields higher (the US Treasury hit 4.55% last week), which raises pressure on central bank interest rates and lures capital out of tech into safe stuffer like financials and energy.

There’s more. War.

On Friday US servicemen were killed and injured in an Iranian missile and drone attack. Blackhawk helos were destroyed. American bases in Gulf countries burned. Bridges and critical infrastructure in Iran were pounded by Trump’s forces, and both sides are promising more death and destruction. The Strait of Hormuz is closed again. The ceasefire is dust and the MOU incinerated. The war is widening and the American president is trapped while Iran’s leaders offer their citizens only pain and pride.

Oil could be a hundred bucks again. Nobody knows. Inflation will follow. Then higher rates. And political implications.

“It’s more likely hubris than reality, but President Trump’s warning about soon bombing civilian assets in Iran would be the biggest escalation to date and puts us into uncharted waters on the conflict including forms of retaliation,” Scotia economist Derek Holt wrote this weekend. “The MOU is in ashes and was never sustainable in the first place given Iran’s managed irresolution approach to negotiations and given President Trump’s poor polling around handling the war. We’re now looking at the highest gasoline futures curves of the conflict to date with oil futures approaching prior peaks especially further out in time.”

There’s more. Democracy.

On Thursday night in a primetime address Trump again suggested US elections are rigged, untrustworthy, broken and suspect. He wants Washington to seize control of state voting and urges passage of the ‘Save America’ act which would effectively disenfranchise millions of citizens, mostly Democratic supporters. Meanwhile he’s encouraged red states to rejig electoral maps to skew results and even told the postal service to restrict mail balloting procedures (more Dems use mail).

If Republicans do well in the coming midterms, elections will have been free and fair. If Democrats prevail, they cheated. Polling suggests Trump’s party will be spanked so it’s likely the president, deeply unpopular, will try to challenge or even overturn results. Buckle up.

In short, hold the beer. I’m switching to scotch.

About the picture: “Greetings from Dundas Ontario!” writes Duane. “It’s been over 12 years since we had a dog and finally found the right spot as our kids have gotten older. Here’s Alfred, a Cavalier King Charles Spaniel at 9 weeks, putting our kid’s zip line to his own uses. The haze in the pic is the wildfire smoke in Ontario we got mid July.”

To be in touch or send a picture of your beast, email to ‘[email protected]’.

Source: https://www.greaterfool.ca/2026/07/19/risk-off-2/