The magnitude of the collapse is significant — 7.93% from the high on February 19 to the low on March 10. In terms of scale and intensity over a comparable time period, the last time the market fell 7.9% or more was on August 5, 2023 (8.95%), and before that, in October 2022, during a bear market phase.
Historical Market Corrections
An 8% correction in 13 trading days is uncommon, especially during the historic bubble phase that began on October 27, 2023.
There have been three localized corrections of more than 5% in the past 1.5 years, excluding the current one:
- December 6, 2023 – January 13, 2024 (23 trading days, 5.4% decline);
- July 16 – August 5, 2023 (14 trading days, 9.7%);
- March 28 – April 19, 2023 (15 trading days, 5.9%).
The current collapse is the second largest after the August 5 decline. More than $5 trillion in market capitalization has been wiped out so far.
The market successfully overcame the pre-election lows of November and reached a local high in July 2024.
The Mood Has Changed
In January, a wave of powerful LLM announcements hit the top U.S. AI developers — an intensity not seen even at the launch of GPT in November 2022.
Now, leading Big Tech companies have lost more than 15% from their early January highs and 13.2% since February 21, bringing them back to mid-June 2023 levels.
The “AI will save the world” narrative is no longer as optimistic as it once was. Faith in a bright, risk-free, and serene future for the U.S. economy has been shaken since the trade wars began.
Sorting out the positive and negative effects of protectionism and the inevitable trade wars requires careful and detailed analysis in several articles. For now, however, I will focus on a different question — what has changed since January?
A critical number of imbalances have accumulated in the system:
- Highly ambiguous macroeconomic indicators;
- Declining corporate profits outside the technology sector;
- Exhaustion of the free liquidity buffer;
- Shrinking private sector net cash flow;
- No comparable growth in monetary aggregates;
- A stock market bubble with no historical parallel.
Conclusion
The "the economy is great, and it will get even better" narrative is no longer convincing. The contradictions have become too numerous, and uncertainty has reached staggering levels — the highest since 2009 — triggering a cascading market collapse.
New "spirit-lifting" narratives have yet to emerge. AI and the once-unshakable belief in the bright future of the U.S. economy are now undergoing a period of rethinking and reassessment.