Panic on the stock markets: investors finally understand that the free money is over, the pillars that supported the gains on the financial market for years have declined. What are the dangers of terrible hysteria?

The fall in stock markets around the world in recent days reflects a tightening of speculative carry trades that investors use to increase their bets rather than a rapid change in the outlook for the economy. SA, analysts say, according to Reuters.

While recent data on the US economy was a factor in the massive sell-off, it was not weak enough to be the main driver of violent moves, analysts say.

The answer may be related to the sudden elimination of carry trade positions, where investors borrowed money from lower interest economies such as Japan and Switzerland to finance investments in assets with higher yields elsewhere.

They were caught on the wrong foot with the Japanese yen appreciating more than 11% against the dollar since hitting 38-year lows just a month ago. The appreciation came after Japan’s central bank unexpectedly raised interest rates. “You can’t reverse the biggest behavioral trade the world has ever seen without breaking heads,” said Kit Jucks, a strategist at SocGen.

It is impossible to know whether the wild fluctuations at the beginning of the week mark the last level of global sales that started to move last week or mark the beginning of a long decline, given – according to Bloomberg.

One thing is clear, however: pillars that have supported gains in the financial market for years, a series of key assumptions that investors around the world have relied on, are being undermined. Looking back, they seem a little naive: the American economy is unstoppable; artificial intelligence is rapidly changing business everywhere; Japan will never raise interest rates, or not enough to matter.

Evidence undermining them has accumulated rapidly in the past few weeks. The July report on the US labor market was weak. So will Big Tech’s AI-related quarterly revenue.

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And Japan’s central bank raised interest rates for the second time this year.

Over three weeks, about $6.4 trillion was wiped from the world’s stock markets.

A shock of this magnitude creates dangers large and small. More obvious: The sell-off, if left unchecked long enough, could cripple the financial system, slow lending and be the final straw that plunges the global economy into recession. fear many now.