Deutsche Bank analysts said AI-related fears drove a rapid repricing in equities, with well over $1 trillion of global equity value erased in 14 days. They said volatility spread beyond technology into sectors such as wealth management, real estate and financials.<\/p>\n
They described last week\u2019s move as shifting from tech-led volatility to a broader sell-off, with the low point on Thursday after a sharp fall in software stocks. They reported double-digit declines across wealth management, real estate and financial companies.<\/p>\n
Market breadth weakened, with the equal-weighted S&P 500 down -1.37% on Thursday, before ending the week up +0.29% and rising +1.04% on Friday. The S&P 500 fell -1.39% for the week, with a +0.05% move on Friday.<\/p>\n
The Nasdaq dropped -2.10% for the week and fell -0.22% on Friday. The Magnificent 7 declined -3.24% for the week and -1.11% on Friday.<\/p>\n
They said US data also influenced markets, citing flat December retail sales, a dovish Q4 Employment Cost Index, and lower Q4 growth expectations from the Atlanta Fed. They linked these releases to a rally in Treasuries and lower yields across the curve.<\/p>\n
Given the sharp increase in volatility, we are positioning for continued market uncertainty in the weeks ahead. The VIX index, which spiked above 28 last week for the first time since the banking stress we saw in 2025, is still elevated at 24, suggesting options premiums will remain expensive. This environment favors strategies that can either hedge downside risk or profit from this elevated volatility, such as buying protective puts on broad indices like the SPX.<\/p>\n
The AI-driven repricing has clearly spread beyond technology, hitting sectors previously seen as stable. We saw implied volatility on the Financial Select Sector SPDR Fund (XLF) double last week as wealth management firms faced steep sell-offs. Therefore, traders should consider looking for weakness outside of the usual tech names, possibly using put spreads on real estate (IYR) or financial ETFs to position for further disruption in those industries.<\/p>\n
While the Magnificent 7 bore the brunt of the initial slide, the sell-off presents a dual opportunity. With the Nasdaq 100 still trading more than 4% below its January highs as of this morning, we are seeing demand for protective collars to hedge long-term tech holdings against further declines. Conversely, for those believing the sell-off is overdone, selling cash-secured puts on fundamentally strong but beaten-down software names could be a way to collect high premiums.<\/p>\n
Looking forward, the market\u2019s direction will likely be dictated by upcoming economic data, especially after the softer prints we saw a couple of weeks ago. All eyes are on the January CPI inflation report due this Thursday, February 19th, which could either calm market fears or add fuel to the fire. We anticipate a surge in demand for short-dated options, particularly straddles on the SPY, as traders brace for a significant move in either direction following the release.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" AI fears triggered rapid equity repricing, erasing $1T in two weeks and spreading volatility beyond technology sectors.<\/p>\n","protected":false},"author":62,"featured_media":16984,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-41967","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41967","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=41967"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41967\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16984"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=41967"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=41967"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=41967"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}