Nervous about an October crash? Diversify your AI exposure

HISTORICALLY, stock market crashes tend to happen in October. However, this year I sense that investors are less apprehensive than in previous years.

Since bottoming out in early April, the increase in the S&P 500’s market capitalisation has exceeded US$15 trillion, which is more than a third of US GDP. This has had an incredible impact on the wealth of American consumers, with the top 10 per cent of earners driving 49.2 per cent of consumption, said Moody Analytics.

Understandably, the US Federal Reserve’s decision to restart interest rate cuts has given market bulls more confidence that the current positive trend in global equity markets will continue. This seems especially likely given that – despite the obvious weakness of the US labour market – the risk of a US recession appears minimal, although non-farm payrolls have remained at levels typically associated with a recession since May.