The S&P 500 started the week by breaking below its 50-day moving average, a level that had long acted as support for buyers during downturns. Not even the news that Warren Buffett's Berkshire Hathaway bought nearly 18 million shares of Alphabet in the third quarter was enough to lift the market.
As usual, talks began to circulate that this could be the long-awaited turning point for the U.S. market and that, of course, another market crash, similar to that of 2008 (people seem to have an almost obsessive need to compare everything to that bubble), could occur due to several negative factors.
First and foremost: market expectations for an interest rate cut by the Fed have fallen. Before the October meeting, a 25-basis-point cut in December seemed virtually guaranteed. Now, in turn, the CME FedWatch tool puts the odds below 50%, suggesting the mood has become noticeably more cautious.
Part of that stems from a lack of data following a 43-day government shutdown, and part from lingering concerns about the inflationary impact of ongoing trade tensions. The Cleveland Fed President even noted that more of the higher costs caused by tariffs will eventually be passed on to U.S. consumers.
A second factor is fears of cracks in the private credit market following the September collapses of auto parts maker First Brands and auto lender Tricolor. Even in the UK, there are now concerns that significant defaults in private credit could spread to the broader financial system, including traditional banks.
Then there is a third factor: the AI bubble may finally be deflating. Investors seem less willing to believe grandiose promises about future potential and increasingly want to see real results. Meanwhile, massive debt issuance by “big tech” companies to finance AI projects only adds fuel to the fire.
Let's assume, then, that we are facing a perfect storm for a fall. How does one protect themselves?
Traditionally, gold (XAU/USD) is considered a safe-haven asset; however, in recent days, its price has fallen in tandem with BTCUSD and the S&P 500, Nasdaq and Dow Jones. What is weighing on gold now is not so much investor apathy as fears that the Fed will actually pause in December, which would push the dollar higher.
And more broadly, when the real panic selling begins, almost all assets, including gold, tend to fall as forced liquidation, margin calls, insolvency fears, and institutional rebalancing hit the market. Therefore, if markets begin to fall, the U.S. dollar, and naturally, short positions would be among the few to benefit,