Is this ‘the big one' for the stock market? Wall Street sounds off as tech plunges.
The recent selloff in technology stocks has raised alarms across Wall Street, following a brief recovery after the midterm elections. This sharp decline not only reflects investor anxiety about tech valuations but also indicates a broader risk-off sentiment that traditionally benefits safe-haven currencies. The impact of this volatility on equities could trigger a significant rotation in FX markets, particularly favoring the US dollar and Japanese yen. As the situation evolves, continued monitoring of investor behavior is critical, as it might signal further carry unwinds.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). Marketwatch's framing suggests a bearish outlook, potentially aligning with BofA's more cautious stance.
How firms align
JPMorgan's position aligns with the cautious sentiment surrounding the tech selloff, predicting the euro to drift lower in the face of heightened volatility in US equities, reflecting their 1.10 target. In contrast, BofA, with a more pessimistic view at 1.04, appears to support the deteriorating outlook for risk-sensitive assets, which is detailed in our internal /reports/bofa.
What the data shows
Recent revisions from these firms highlight a shift in sentiment, with many adjusting expectations following the equity market's whipsaw behavior. For additional context, refer to our insight on risk-on/risk-off dynamics, available at /research/market-dynamics.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Tech selloff driven by fears prompts risk-off sentiment favoring USD and JPY.
- 02Monitor for volatility spillover effects into FX markets.
- 03Key level: EUR/USD may test lower bounds amid equity weakness.
- 04Investors should be alert to signs of carry unwinds.
Market implications
Watch for EUR/USD movements around the 1.075 consensus level as market reactions develop. Key calendar events include upcoming earnings reports from major tech firms which could further influence sentiment.
Risks to this view
Should tech stocks recover quickly or if strong economic data emerges, the current bearish outlook could reverse. A significant catalyst, such as unexpected Fed policy changes, would also challenge the prevailing risk-off sentiment.
Sentiment by currency
USD+EUR~JPY+GBP~Composite USD score: +0.65
Sources & References
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