No Safe Harbor: Markets Fall in Sync Around the World

The notion of decoupling—that one region can thrive while another falls—has been disproven this week. A global contagion of selling has swept through financial capitals, linking the fate of Tokyo, London, and New York. The catalyst is a shared fear of an Artificial Intelligence bubble and a unified disappointment in US monetary policy.
In Asia, the Nikkei 225 led the rout with a 3.2% drop. Europe followed, with the Stoxx 600 and FTSE 100 posting their worst days in months. Finally, Wall Street opened lower, confirming the negative trend. The $1 trillion loss in the global crypto market served as the prelude to this symphony of destruction.
The interconnectedness of the global financial system is the culprit. US tech giants drive global indices; when they sneeze, the world catches a cold. Sundar Pichai’s warning that “no company is immune” applies to geographical regions as well.
Furthermore, the strong US dollar is exporting deflationary pressure to the rest of the world. As rates stay high in the US, capital flees emerging markets and Europe, depressing asset prices globally.
Investors looking to diversify internationally are finding that in a crisis, all correlations approach one. The global village is currently a global bear market.