LIVE MARKETS-AI jitters? History points to more bumps ahead

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AI JITTERS? HISTORY POINTS TO MORE BUMPS AHEAD

Tech has sold off lately, on the back of fresh angst over the global AI trade that has been powering markets this year. Demand for computing infrastructure remains strong, but many money managers are bracing for a more turbulent phase ahead.

Among them, UBS says higher volatility is becoming the new normal, and market history suggests it may have a point.

A study by SentimenTrader found that the Nasdaq 100's 10.4% decline from its October high closely resembles 17 similar 65-trading-day patterns seen over the past two decades. Most of those episodes ultimately ended well, but they often involved sharp swings along the way.

On the one hand, 94% of the historical cases were higher one year later, delivering an average gain of 23%, suggesting the broader uptrend remained intact, the study found.

On the other, several of the matched periods suffered deep declines before recovering. "A higher level a year later does not mean the position was easy to hold." The September 2008 example saw the Nasdaq 100 fall more than 30% over the following six months before ending the year in slightly positive territory.

"We lean toward treating this as a drawdown that can still be repaired over the next three to twelve months, not an established long-term decline," SentimenTrader concludes.

(Danilo Masoni)

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