Why AJ Bell Believes The Market Could Witness Huge Swings In Coming Times

• Mould said that various leading figures in the financial world have expressed concerns, while highlighting Michael Burry’s bets against certain big-name tech stocks. 
• A 2% decline in the Nasdaq index and a 10.7% jump in the Vix fear gauge were like a sharp bout of turbulence on a flight, he stated.
• On Tuesday, U.S. markets experienced a sell-off, raising concerns about a potential slowdown in the strong momentum the markets have exhibited so far.  

AJ Bell Investment Director Russ Mould noted on Wednesday that the market could experience significant swings over the coming weeks and months, as there are good reasons with both buyers and sellers to support their decisions.

“Big money has been made on financial markets this year, and there is the potential for some people to decide enough is enough and to lock in profits,” Mould said. At the same time, many people believe there is a good reason to stay fully invested, as there are tailwinds that can take markets even higher.

AI Bubble

Investors have become increasingly concerned about the valuations of large technology companies, particularly in light of the recent surge in their investment in artificial intelligence (AI) and their ability to scale AI growth.

“Certain investors have been worried about high equity valuations, US liquidity constraints, red flags in the US regional banking sector, and incestuous behaviour among mega-cap US tech stocks around AI,” Mould said.

He noted that various leading figures in the financial world have expressed concerns and highlighted Michael Burry’s bet against certain big-name tech stocks. “The Big Short” legend Burry of Scion Asset Management has placed a short bet on Nvidia Corp and Palantir.

“That kind of chatter will always cause investors to shiver,” Mould added.

Tuesday’s Sell-Off

On Tuesday, U.S. markets experienced a sell-off, raising concerns about a slowdown in the strong momentum they had maintained so far.  

“A 2% decline in the Nasdaq index and a 10.7% jump in the Vix fear gauge were like a sharp bout of turbulence on a flight – unpleasant, but just for a moment. The fact a major sell-off didn’t occur across the whole of Asian and European markets following Wall Street’s wobble implies that we’re not at the start of the correction many people have feared,” Mould noted.

Meanwhile, U.S. equities fell in Wednesday's premarket trading. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down 0.40%, the Invesco QQQ Trust ETF (QQQ) fell 0.64%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) fell 0.13%.

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Also See: Why Upstart Stock Is Plunging Over 14% Premarket Today

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